AP: New “Jobs Bill” Doesn’t Create Jobs
Yeah, it’s gonna suck to be this AP reporter for the next couple weeks. Not only did he just lost his gig and be forced to cover dog shows in Hoboken, New Jersey for the next six years, but Talking Points Memo will be dissecting his tax returns by week’s end.
It’s a bipartisan jobs bill that would hand President Barack Obama a badly needed political victory and placate Republicans with tax cuts at the same time. But it has a problem: It won’t create many jobs.
Even the Obama administration acknowledges the legislation’s centerpiece — a tax cut for businesses that hire unemployed workers — would work only on the margins.
As for the bill’s effectiveness, tax experts and business leaders said companies are unlikely to hire workers just to receive a tax break. Before businesses start hiring, they need increased demand for their products, more work for their employees and more revenue to pay those workers.
“We’re skeptical that it’s going to be a big job creator,” said Bill Rys, tax counsel for the National Federation of Independent Business. “There’s certainly nothing wrong with giving a tax break to a business that’s hired a new worker, especially in these tough times. But in terms of being an incentive to hire a lot of workers, we’re skeptical.”
Rick Klahsen, a tax expert at the accounting firm RSM McGladrey, said his clients need to see business pick up before they can hire more workers.
“If demand were increased, they are saying it will take care of itself because I will then have the motivation to go out and hire new employees,” Klahsen said.
A number of entities have been saying for the past few weeks — when Democrats first proposed the tax credit for hiring — that the economics behind it just don’t pan out. You can read a Heritage Foundation post on it here, but I found what the National Association of Manufacturers (NAM) had to say much more compelling.
NAM is actually in the business of hiring people after all.
There’s only one problem: Business groups say the credit won’t do much to boost hiring.
“I really don’t think it’s going to be much of an incentive,” says Bill Rys, tax counsel for the National Federation of Independent Business. “Mostly it is going to be used by businesses that would have been hiring anyway.”
The National Association of Manufacturers is promoting its own job-creation package, featuring a cut in corporate income tax rates and a more generous tax credit for research and development. The group considers those changes more important than the $5,000 tax credit.
“For those manufacturers who are looking to hire, this will help,” says spokeswoman Erin Streeter. “We don’t anticipate this tax credit being a reason for them to hire. Our members are going to hire if there is a long-term need.”
Businesses hired because they need someone to do work for them, not because they’re getting a tax credit. As I said previously when this topic was brought up:
It’s not real economic development and any business that builds itself based solely on manipulating the tax code is playing with fire in the long-run.