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The Washington Independent
The Washington Independent

Dems’ Tax Credit Would Create 200,000 Jobs — Just 10.8 Million Shy of Target

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

Elisa Mueller
Last updated: Jul 31, 2020 | Feb 13, 2010

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. *

Elisa Mueller | Elisa Mueller was born in Kansas City, Missouri, to a mother who taught reading and a father who taught film. As a result, she spent an excessive amount of her childhood reading books and watching movies. She went to the University of Kansas for college, where she earned bachelor's degrees in English and journalism. She moved to New York City and worked for Entertainment Weekly magazine for ten years, visiting film sets all over the world.


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