rssDems’ Tax Credit Would Create 200,000 Jobs — Just 10.8 Million Shy of Target
Friday, February 12, 2010 at 5:53 pm
- 29 Comments
The Economic Policy Institute, a liberal policy shop, has some discouraging news for those hoping the Senate’s jobs bill will put a dent in the nation’s 9.7 percent unemployment rate: The business tax break at the heart of the bill will lead to the creation of only 200,000 new jobs this year, EPI notes, pointing to numbers crunched by Timothy J. Bartik, senior economist for the Michigan-based Upjohn Institute for Employment Research.* It’s a drop in the bucket relative to the roughly 11 million jobs needed to bring the jobless rate down to pre-recession levels.
Bartik explains why the Democrats’ business tax exemption for new hires won’t go as far as some might hope:
Limiting the credit to 6.2% for the rest of 2010 also limits the credit’s effectiveness at creating new jobs. For many employers, such a limited credit will be too small to change employer hiring behavior. For example, if an employer is not in a position to even consider expansion until the last quarter of 2010, it is difficult to believe that a 6.2% hiring credit for the final three months of the year will have much effect on their decision about how many hires to make.
Additionally, Bartik warns, the Senate proposal would offer the tax break for all new hires, even when companies simultaneously lay off other workers. By contrast, the White House has proposed a plan to lend the credit only in cases of net job creation. Which, of course, is only the whole point.
*Correction: An earlier version of this post incorrectly named Bartik an EPI economist. Thanks to Mr. Bartik for pointing out the error.
29 Comments
Comment posted February 13, 2010 @ 5:15 am
A tax credit doesn't even touch the tip of the iceburg. The whole financial system in America is finally coming to a head and needs a complete overhaul. Do you know why I, as a small business owner, decided to fire all my employees and closed up shop? Because it is no longer worth it to do business in American. The taxes and costs of doing business are simply too high, and with the skyrocketing cost of living and cost of fuel, there's just no reward in it anymore. Add to that Americans are being undersold left, right and center by foreign imports, and it is no wonder we are a collapsing economy!
Get rid of the IRS, go on a national sales tax, kick the foreign interests out of America, let the cost of living deflate back to 1920s levels, and maybe I'll be willing to open up shop and start hiring again.
Comment posted February 13, 2010 @ 4:57 pm
One correction: I am a senior economist for the Upjohn Institute for Employment Research in Kalamazoo, not for EPI. EPI posted my comment on the Schumer-Hatch bill.
Tim Bartik
Comment posted February 13, 2010 @ 4:57 pm
And yet the guy who sells weenies from a cart in front of the old federal building (retired cop) only works 5 warm months out of the year, employs about ten people, and spends the other 7 months going to Mexico and buying more businesses in spite of the bad economy. Coffee stands in office buildings, who knew?
Maybe you picked the wrong business? I wouldn't be selling dvds, cds, beanie babies or other things that compete with Amazon, WalMart, Krogers, etc. right now, but I'm frequently amazed at who is doing well despite the economy, including where I work. The discount cigarette guys are making bank.
Comment posted February 14, 2010 @ 11:43 am
Corrected. Thanks for pointing that out. –Mike
Comment posted February 14, 2010 @ 4:43 pm
Corrected. Thanks for pointing that out. –Mike
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