How Obama's tax credit helps, hurts IT spending

Even if the timeframe for the R&D tax credit proposed by President Barack Obama was clear, there is still ambiguity about whether Congress will approve it, particularly in the weeks leading up to the mid-term election. But the fact that the president has pitched this tax break may be enough to prompt some IT managers to take a second look at some of their purchase plans, said Joseph Pucciarelli, program director of technology financial and executive strategies at IDC. An announcement of a major tax incentive for 2011 capital investment will cause a reduction in discretionary IT spending, equipment and system upgrades for the balance of 2010, said Pucciarelli. The tax proposal "will definitely cause borderline projects to be deferred, if the CFO believes that this proposal has a possibility of being implemented," Pucciarelli said. If the investment write-off is approved, Pucciarelli estimates that it could increase IT spending anywhere between 7 percent and 12 percent. IT hardware purchases are forecasted this year by IDC to reach $135 billion.