The Tax Foundation’s Bill Ahern posted this yesterday saying that the jobs bill recently passed by the U.S. Senate would pay companies for the wrong things. The short article is full of great links so you should really read it for yourself, but here are the bullets.
- Firms that claim the credit would have hired the person anyway, in which case the credit is just corporate welfare.
- Firms may game the system by abolishing and re-creating jobs.
- Temporary tax breaks can’t inspire an expensive long-term commitment like a new hire. Only a permanent rate cut can credibly claim to be such a powerful economic incentive, and even then, counting “jobs created” is hooey.
Regular readers will recognize the third point as one of my favorites. One shot tricks are about creating votes not jobs. Businesses don’t hire because they get a one-time gift. They hire (in part) because permanent rate cuts make previously uneconomic jobs more economic.
If the administration and Congress were serious about improving the economy they would deliver large permanent rate cuts now and they would add the spending cuts needed to avoid making the deficit any worse.
Maybe they should take the remaining stimulus money and return it to taxpayers in the form of large permanent cuts that apply retroactively to 2009 taxes and as they say on TV “watch what happens”.