Obama's Tax Credit Jobs Plan On Target
It's time to stop dithering and debating the point; President Barack Obama has proposed, yet again, a valid way for government to truly assist the private sector in creating jobs.
"Obama's push to create jobs includes a new tax credit for small businesses that add employees, an idea that has appeal as the nation struggles with an unemployment rate topping 10 percent," The Associated Press reported. "It is an idea, however, that fell flat in Congress when Obama first proposed it last year because lawmakers didn't know how to target the credit effectively."
That's right. Congress - which has recently passed trillions of dollars worth of spending bills without reading them - is stumped on how a tax credit could work, so it hasn't been willing to act.
But it's really not that complicated.
"Two economists have been promoting a job creation tax credit for the past several months: John H. Bishop, a professor at Cornell University, and Timothy J. Bartik, senior economist at the W. E. Upjohn Institute for Employment Research in Michigan," the AP adds. "Under their proposal, businesses that increase their payrolls by more than 3 percent over 2009 levels would get tax credits worth 15 percent of the increase. The tax credit would only apply to the first $50,000 of a worker's salary, capping the amount at $7,500 per worker."
The credit would be available for big and small businesses, and for "existing workers who get raises or more hours, as long as payroll is increased for employees making less than $50,000," the AP explains. "The tax credits would be refundable, meaning employers would get them as payments, even if they don't owe any taxes."
Obviously, the tax credit would lead to the hiring of more low-end wage earners. And it couldn't come at a better time.
"The United States economic recession has taken a particularly heavy toll on young Americans, with a record one of five black men ages 20 to 24 neither working nor in school, according to research released on Tuesday," Reuters reported. "Teenagers have found it significantly harder to get a job since the recession began in late 2007, with black youths and young people from low-income families faring the worst."
And of course, hiring more low-end workers means hiring more managers. The effect of a simple tax credit could be profound. And it's much more effective than funding government make-work jobs.
"We're trying to find a way to lower the cost of adding labor," economist Bishop said. "The job creation tax credit has the highest bang for buck."
The Congressional Budget Office agrees.
Of course, some in Congress will use the president's newfound realization of a growing deficit as a reason to oppose the tax credit. That's disingenuous; a tax credit does not add to the deficit. Working with a zero-based budget - as average Americans do, and as Congress ought to - a tax credit doesn't affect the bottom line because it's never assumed as a revenue.
Beyond that, a tax credit makes sense. Each job potentially lifts one person - even one family - out of unemployment and into the taxpaying workforce. What was a liability now becomes an asset.
The president has proposed a solid policy for creating jobs. Congress should quickly supply the enabling legislation.