Tax Incentive to Start US Economic Engine

US quarterly GDP data released by Commerce Department showed a modest 2% growth in the third quarter of the year.

The recession was over a year ago, but the economy has not shown enough steam to move ahead to stimulate job and spending growth.

GDP data is showing a continued existence of unemployment, spending contraction, poor business environment and housing market, which will continue to inflict pain of recession on the US economy.

This brings us to the inevitable tax changes on the personal and business income in 2011. It is pretty much confirmed, in US people making over $250,000 will bear a higher tax burden in 2011.

With the GDP results, US President Obama, tried to gain support for his proposal for accelerated tax write-offs for business investments for equipment.

Reason being, businesses will invest in new equipments, hire skilled workers and increase productivity and save on income tax.

But smart businesses will look at the GDP data and the future outlook is not rosy enough for them to beef up productivity and start hiring, just to increase stored inventory.

This time, sustained economic recovery’s main catalyst is real recovery in the labor market. Until people have jobs and businesses gets confidence to hire new employees, US is faced with a continued slow or negative growth in the economic recovery from recession.

After spending increase in this holiday season, the first quarter of 2011 GDP is expected to contract and nose dive confirming, US businesses does not have confidence in published economic recovery news in the media or by the politicians.