Democrats balk at $30 billion tax credit for employers

posted at 10:30 am on February 4, 2010 by Ed Morrissey

Barack Obama unveiled one policy in his State of the Union speech that initially sounded good to conservatives — a tax credit to incentivize hiring and wage increases in small businesses.  He proposed a $5000 credit for every new hire or every wage increase, although he tied it rhetorically to a new loan-incentive program that keeps TARP in business:

We should start where most new jobs do – in small businesses, companies that begin when an entrepreneur takes a chance on a dream, or a worker decides its time she became her own boss.

Through sheer grit and determination, these companies have weathered the recession and are ready to grow.  But when you talk to small business owners in places like Allentown, Pennsylvania or Elyria, Ohio, you find out that even though banks on Wall Street are lending again, they are mostly lending to bigger companies.  But financing remains difficult for small business owners across the country.

So tonight, I’m proposing that we take $30 billion of the money Wall Street banks have repaid and use it to help community banks give small businesses the credit they need to stay afloat.  I am also proposing a new small business tax credit – one that will go to over one million small businesses who hire new workers or raise wages.  While we’re at it, let’s also eliminate all capital gains taxes on small business investment; and provide a tax incentive for all businesses, large and small, to invest in new plants and equipment.

At least some of this makes sense, especially the elimination of capital-gains taxes on small business investment.  Many would argue for across-the-board cuts in CG taxes, or elimination of CG taxes entirely.  Such an environment would spur more risk-taking of a healthy kind, as people put their money into the kind of new ventures and expansion that lead to actual job creation.  Why give corporations a better tax break than individuals, after all, when both investor classes have the same impact?

The tax breaks for hiring and wage increases looks more like a gimmick than a policy, and even Obama’s allies in Congress scoff at it:

President Obama’s $33 billion proposal to offer payroll tax credits to create jobs is being met with opposition among some House Democrats who question whether the incentives are strong enough.

Rep. Mike Thompson, California Democrat, questioned whether a $5,000 payroll tax credit for every net new employee is strong enough to have an impact on the country’s 10 percent unemployment rate.

“I don’t know anybody in business who hires an employee because they’re going to get a tax break,” Mr. Thompson said at a House Ways and Means Committee hearing with Treasury Secretary Timothy F. Geithner. “People hire employees because they have work to do.”

Rep. Lloyd Doggett, Texas Democrat, cited “general consensus among tax experts is that the credit is a stinker because it simply encourages people to do what they would have done anyway.”

This part of Obama’s plan seems poorly conceived.  At even a minimum-wage position, the cost of an employee (with the kind of benefits Obama intends to mandate in other policies) would cost a business at least four times as much as the incentive.  On the other hand, the application of the incentive to wage increases is more likely to deter employers from hiring than to incentivize them.  A $2000 raise, or roughly $1 an hour, would allow the employer to demand more productivity from an existing employee while pocketing the tax credit difference of $3000.

Businesses do not hire people to cash in on tax credits.  They hire people when they have too much work for their existing workforce.  The tax incentive won’t prompt businesses to hire people without first having the unfilled demand.  Anyone who had a passing knowledge of business practice and actual accounting would have seen this immediately.  As Doggett points out, businesses who claim the tax credit would have hired new employees anyway, and those that cannot afford new hires won’t change their mind for a tax credit of only five grand.

The entire notion of providing incentives for hiring that is disconnected from demand reveals a mindset where central planning is given higher priority than market conditions.  Obama would do better to relieve the tax burden on investors and scale back the regulatory Leviathan he’s attempting to build.  We can have a real recovery if Obama would just get out of the way.


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Why do democrats including Obama hate people that employ other people?

daesleeper on February 4, 2010 at 10:32 AM

We can have a real recovery if Obama would just get out of the way.

Thank you.

Christian Conservative on February 4, 2010 at 10:32 AM

We can have a real recovery if Obama would just get out of the way.

Don’t mess with him while he’s mopping….

ted c on February 4, 2010 at 10:35 AM

Democrats won’t get out of the way – ever. Their entire existence is built on being in the way.

Thunderstorm129 on February 4, 2010 at 10:35 AM

Doesn’t this penalize employers who have kept their employees on while riding out the recession? Won’t they fire their employees now so that they can hire them back when the credit goes into effect?

Buddahpundit on February 4, 2010 at 10:36 AM

The tax breaks for hiring and wage increases looks more like a gimmick than a policy,

Abaolutely. Not only that, but the tax incentives are only targeted to employers who hire unemployed people.

Not the most qualified job seekers, just unemployed people.

In other words, this is a job market “cash for klunkers” program. Democrats just love to micromanage, don’t they?

UltimateBob on February 4, 2010 at 10:37 AM

Rep. Lloyd Doggett, Texas Democrat, cited “general consensus among tax experts is that the credit is a stinker because it simply encourages people to do what they would have done anyway.”

Gosh, like that cash for clunkers program that really didn’t work??!!

atlgal on February 4, 2010 at 10:37 AM

Community Organizer thinking creates community organizer results. Obama has never led anything other than a campaign, so why should any of his ideas seem viable? We should demand a simplified tax code.

AASLT on February 4, 2010 at 10:37 AM

I fully expect these “community banks” are going to be forced to lend to “small businesses” who have little to no chance of paying the money back (similar to what we saw with Fannie and Freddie).

I expect to see significant emphasis placed on lending to new small business start-ups in carefully (read: politically) chosen geographic areas and with particular (read: political) attention to certain demographic groups.

Jason Coleman on February 4, 2010 at 10:38 AM

these are the type of ideas you get when you have people in power that have never run a business.CLUELESS!!!

centryt on February 4, 2010 at 10:38 AM

Dems: ‘Why spend money on people, when there are endangered dust mice (and dem congressmen) to save?’

Vashta.Nerada on February 4, 2010 at 10:38 AM

Rep. Mike Thompson, California Democrat, questioned whether a $5,000 payroll tax credit for every net new employee is strong enough to have an impact on the country’s 10 percent unemployment rate

Finally, some clarity. This tax credit is the equivalent of bending over a dollar to pick up a dime. It’s going to cost a whole lot more than $5K to recruit/hire/train/retain/cover/benefit etc. a new employee. This is like trying to convince me to spend $1,000 on a new TV by saying I’ll save $5 if I do it.

Incentives.

ted c on February 4, 2010 at 10:38 AM

People, slowly but surely are figuring out that this socialist crackpot is purposely avoiding the obvious solution to the jobs issue- massive tax cuts and regulation cutbacks at all business levels.
Even the water carriers at CNBC were starting to question these worthless credits offered up to a crippled private sector.
I hate the tin foil brigade but at a certain point it becomes obvious that this is being purposely avoided for idealogical reasons.

jjshaka on February 4, 2010 at 10:39 AM

“I don’t know anybody in business who hires an employee because they’re going to get a tax break,”

Obama’s an economics/business illiterate, and he’s surrounded himself with illiterates. These people have never held a job in private business, not to mention never managed one. Having these bureacrats steer the economy is like asking a fish to ride a bicycle.

petefrt on February 4, 2010 at 10:40 AM

Anyone who had a passing knowledge of business practice and actual accounting would have seen this immediately.

Not in this White House.

GarandFan on February 4, 2010 at 10:41 AM

If Obama didn’t fail Economics in college, it’s because of one of three reasons:

- He never took Economics.
- The Economics course was taught by DemonSheep.
- He got a “gentleman’s” D-.

steveegg on February 4, 2010 at 10:42 AM

A one-time tax credit won’t do squat.

Reforming or eliminating onerous regulations would help – like this jobs killer.

forest on February 4, 2010 at 10:42 AM

Amazing that progressives talk on one side of their mouth about lower capital gains to help spur business, but also claim that taxes do not impact the economy and decision making.

WashJeff on February 4, 2010 at 10:44 AM

Oz did a similar thing a few years ago (wage subsidy). As soon as the subsidy stopped, the subsidized workers were all let go.

Also did it with apprentices. As soon as an apprentice finished the course, they were fired.

Employers may take advantage of such schemes, but they don’t provide long-term employment.

But, the unemployment figures went down for a critical period – upcoming elections. Cynical?

OldEnglish on February 4, 2010 at 10:44 AM

Is that all? I’m surprised at Bambi’s forebearance.

I would have expected Bambi’s tax breaks to go only to businesses that hire the previously unemployed AND only to businesses that create green technology AND only to businesses that meet race and gender and sexual orientation quotas AND only to businesses that are unionized AND only to businesses that contributed to the DNC (that last part would not be publicized.)

PackerBronco on February 4, 2010 at 10:44 AM

THE ONE says he understands that the private sector creates jobs and wealth…

but does EVERYTHING possible to defeat the workings of a market economy.

People see what THE ONE’s fascist economic policy is doing

and that fascist policy abhors entrepreneurial activity (it being too “free” and dynamic to easily control). Big business…the ones who get on the bus before their competitors…are beloved by the collective.

Ragspierre on February 4, 2010 at 10:44 AM

Rep. Lloyd Doggett, Texas Democrat, cited “general consensus among tax experts is that the credit is a stinker because it simply encourages people to do what they would have done anyway.”

So, this is like getting a tax credit for brushing your teeth or wiping your a$$. It changes nothing.

ted c on February 4, 2010 at 10:46 AM

Dow down 172. Why is the market tanking this morning? It is the “unexpected” unemployment numbers?

Johnnyreb on February 4, 2010 at 10:46 AM

News flash: Marxist doesn’t understand economics.

Akzed on February 4, 2010 at 10:49 AM

Amateur…

d1carter on February 4, 2010 at 10:51 AM

Strange times when you can put the uber liberal Lloyd Doggett on the side of clear thinking. Don’t tell Austin.

DanMan on February 4, 2010 at 10:52 AM

Obama would do better to relieve the tax burden on investors and scale back the regulatory Leviathan he’s attempting to build. We can have a real recovery if Obama would just get out of the way.

Not arguing with the logic, Ed, just don’t hold your breath waiting for that to happen. Sometimes, I really think you believe Obama could be made to see the light if only it were presented logically to him. I do hope you’re not that naive.

Extrafishy on February 4, 2010 at 10:52 AM

The economy needs demand, it has over-supply.

tarpon on February 4, 2010 at 10:53 AM

I actually like this idea. Nothing would warm my heart more than having an extra dozen guys being paid to lounge around the shop because I don’t have enough work for them. Sterling way in which to run a business.

Bishop on February 4, 2010 at 10:54 AM

This tax credit is the equivalent of bending over a dollar to pick up a dime. It’s going to cost a whole lot more than $5K to recruit/hire/train/retain/cover/benefit etc. a new employee. This is like trying to convince me to spend $1,000 on a new TV by saying I’ll save $5 if I do it.

Incentives.

ted c on February 4, 2010 at 10:38 AM

Exactly. The cost to recruit, train and provide benefits is far more expensive than $5,000. What if the employee quits or has to be fired? No “tax credit,” eh?

The idiocy of this administration is stunning.

Cody1991 on February 4, 2010 at 10:54 AM

Sometimes, I really think you believe Obama could be made to see the light if only it were presented logically to him.

Extrafishy on February 4, 2010 at 10:52 AM

Obama is extremely intelligent, the problem is that he believes in things that ain’t so.

PackerBronco on February 4, 2010 at 10:55 AM

Mr. Never Had To Meet A Payroll In Chief tosses out a bone thinking the party of no will jump on it and it turns out to be some dems instead. Barry’s still calling tax credit a tax cut in his speeches. Credit or cut all the same, right?

Kissmygrits on February 4, 2010 at 10:57 AM

We should raise the state unemployment tax rate so employers have to pay more per employee. That should help companies florish. /sarc off

WashJeff on February 4, 2010 at 10:57 AM

Dunno, actually.

Let’s say you’re a small business owner and have a customer who is willing to buy your product, but it is marginally not worth your while to sell your product to the customer (when you calculate your total variable cost and add in risk premiums, cost of capital and opportunity costs and so forth) because of the price the customer is offering.

This may be too simplistic, but if the tax credit decreases your labor cost so it becomes worth your while to make the product for the customer, wouldn’t it help the entire economy, because the customer gets the product it wanted (and therefore is happier), you get to make a profit on it, and someone gets hired and is able to spend or save as a result of the wages you’re paying. I am not 100% clear why this sort of incentive would not help the economy.

Doodad Pro on February 4, 2010 at 10:58 AM

News flash: Marxist unexpectedly doesn’t understand economics.

Akzed on February 4, 2010 at 10:49 AM

Midas on February 4, 2010 at 10:58 AM

And EVERY economist agrees with him too.

barnone on February 4, 2010 at 10:59 AM

Sometimes, I really think you believe Obama could be made to see the light if only it were presented logically to him.

Extrafishy on February 4, 2010 at 10:52 AM

I used to think that about liberals in general. Personal experience has led me to believe quite the opposite now.

Midas on February 4, 2010 at 11:00 AM

Like the cash for clunkers program, the only thing this credit would do is to hurry up hiring that was going to happen anyway.

o employer who knows how to stay in business is going to hire a permanent employee based on a one year tax break. Especially with future state of economy, taxes, and regulations so much up in the air.

MarkTheGreat on February 4, 2010 at 11:02 AM

At least some of this makes sense, especially the elimination of capital-gains taxes on small business investment

They can give me all the tax breaks in the world, isn’t going to me one bit of good until my bank will loan me some short term funds for new, badly needed equipment.

And a tax break for hiring someone, don’t make me laugh. I’ve laid off two employee’s in the past year……….

because there is no work.

Knucklehead on February 4, 2010 at 11:02 AM

Over at American Thinker, Henry Oliner has written, “Why Obama’s Tax Incentives for Small Business Will Backfire”

I’m so sick of BO I could scream and often do, these days.

winfield on February 4, 2010 at 11:03 AM

Harvard boy simply does not know what he’s doing. He’s in waaaay over his head.

John the Libertarian on February 4, 2010 at 11:04 AM

The idiocy of this administration is stunning.

Cody1991 on February 4, 2010 at 10:54 AM

Some unscrupulous employers may “hire” 100 people, promptly fire them, and claim $500,000 in tax credits?

ted c on February 4, 2010 at 11:04 AM

My uncle, who I worked for from 14-20yrs old, ought to go teach this guy a lesson. He had two employees–me and my brother. We got stuff done, he made money–not a lot, but it paid the bills. I learned a lot to boot.

ted c on February 4, 2010 at 11:06 AM

Democrats won’t get out of the way – ever. Their entire existence is built on being in the way.

Thunderstorm129 on February 4, 2010 at 10:35 AM

Bravo . . . that says it all.

rplat on February 4, 2010 at 11:07 AM

As long as Obamacare is still hanging over their heads, business will be reluctant to hire.

KILL THE BILL

kooly on February 4, 2010 at 11:07 AM

We can’t just keep throwing money at every problem that comes up. President flip-flop was just talking about cutting spending, what…less than a week ago? Now he’s come up with another way to “help” that will add to the deficit without producing the desired outcome. Every day it seems he comes up with another way to spend billions of dollars we don’t have.

scalleywag on February 4, 2010 at 11:08 AM

Golly Gosh Geewhillikers!!! Did wittle Obama come up with this idea all by himself? I’m guessing…..yes!

capejasmine on February 4, 2010 at 11:13 AM

The entire notion…reveals a mindset where central planning is given higher priority than market conditions.

Soon – “Obama announces ’5-Year Plan’ Strategy for economic recovery”

eeyore on February 4, 2010 at 11:13 AM

Clunker Employees?

Employers should be as wary of anything from Obama as solvent banks and Ford have been. Obama has a nasty habit of demanding more in return than contractually agreed. Obama can rightfully claim precedence as the first president with total disregard for contract law (not to mention his antipathy for our Constitution).

maverick muse on February 4, 2010 at 11:13 AM

I run a small business and we don’t hire people “when we have too much work to do”. We hire people in anticipation of having too much work to do. Big difference. When my sales staff starts loading up their pipeline, and I start hearing about business potentially up for bid I start thinking about how to staff it, if we win. A decrease in tax rates generates that sort of activity. A tax credit doesn’t. Real simple fact, but a distinction the president just plain does not understand.

MTF on February 4, 2010 at 11:18 AM

Welcome to Kabuki Theater. The Democrats knew in advance that this tax cut proposal was going nowhere even before the words flashed across Obama’s teleprompter and out of his mouth.

Emperor Norton on February 4, 2010 at 11:20 AM

Once again biting the hand that feeds them.

sheesh on February 4, 2010 at 11:20 AM

Why do democrats including Obama hate people that employ other people?

daesleeper on February 4, 2010 at 10:32 AM

Because only government should employ people. The State uber alles.

rbj on February 4, 2010 at 11:21 AM

Looks like having 8% of your staff from private business is not the way to get the economy rolling again. However, to a a hammer the whole world is a nail.

jukin on February 4, 2010 at 11:27 AM

Wouldn’t it just be easier if Obama would give us all the Skittle shitting Unicorns he promised?

jukin on February 4, 2010 at 11:31 AM

daesleeper on February 4, 2010 at 10:32 AM

Boring comment: In the popular liberal (progressive) imagination, businesses are servants of the state. Thus, Porkulus was set to fund state or federal programs.

Dark truth: He can do tax cuts. He can kick off inflation to motivate spending. He can stay a course that is similar to that which led to Japan’s lost decade. And we know how Dems have to add the words “for the rich” every time they say tax cuts.

In the immortal words of Joe Biden, (joking about TOTUS) “what would he do? What would he do?”

IlikedAUH2O on February 4, 2010 at 11:31 AM

Less than 10% of Obama’s administration has ever even held a private sector job. Is it any wonder that NO ONE around him understands basic economics?

ihasurnominashun on February 4, 2010 at 11:34 AM

Ed is correct on every point, IMHO. Moreover as Judd Gregg pointed out yesterday, O-bow-ma cannot take the TARP repayment and use it as he pleases.

The repaid funds, by law must return to the general fund to be used to pay off the national debt.

Effectively if you connect a couple of Bozo’s speeches, he’s saying he wants tax money that he stole from us to bail out the finance companies BACK so he can spend it again on some other fool thing.

And people are too stupid to get it.

Speaking of that, I learned yesterday the AIG bailout may in fact have been outright illegal.

dogsoldier on February 4, 2010 at 11:38 AM

Obama is extremely intelligent

PackerBronco on February 4, 2010 at 10:55 AM

Would someone, anyone, please supply me with the proof of this statement that I see still being made frequently.

I still maintain that Obama’s intelligence is below the average of a college grad, and that he doesn’t even possess the average smarts. I have seen no proof to the contrary.

Yoop on February 4, 2010 at 11:39 AM

Obowma is always reaching for ideas that have no chance of working. He is the definition of a guy in way over his head.

To me he is becoming a pitiful figure. I take no glee from seeing our president as pitiful.

FireBlogger on February 4, 2010 at 11:39 AM

Lies, gimmicks and sops to centrism. That’s it. Everything else, what he really wants to do, is contrived in secret and sent out into the world under aliases to work its Socialist poisonous wonders.

rrpjr on February 4, 2010 at 11:45 AM

“We can have a real recovery if Obama would just get out of the way.” (Ed)

I’m afraid that we will not see the real recovery that past experience would suggest any time soon, no matter what is done.

I believe that the business sector is learning that the increase we are seeing in productivity, as fewer workers are ask to do more, may become a way of survival for sometime into the future. Rehiring some of the unemployed as the recovery starts, or continues, may not be a priority.

Meanwhile, the presently employed are learning that one way to save their job is to work harder to increase productivity and keep their employer viable.

I don’t expect to see much in the way of significant rehiring for quite some time, no matter what incentive approaches are taken. Business does not trust anything these politicians do presently, with good reason.

Yoop on February 4, 2010 at 11:52 AM

Some unscrupulous employers may “hire” 100 people, promptly fire them, and claim $500,000 in tax credits?

ted c on February 4, 2010 at 11:04 AM

Wonder what the stipulations are with this “tax credit?” Perhaps they have to employ the individual(s) for a year. Who knows. There has to be a catch, though.

Cody1991 on February 4, 2010 at 11:56 AM

If you want jobs, this will do it:

Any employer that increases their permanent headcount by 10% or more gets a 50% reduction in taxes. This goes for corporations, sole proprietorships, partnerships, even foregin companies that have some operations in the US.

That would see an increase. Instead, he tells people $5000 for a job that will cost them at least $50,000. A few companies will hire that extra guy because they are on the cusp of the cost/benefit threshold. But more people will get laid off.

Not to mention they should be extending the Bush tax cuts and cutting everbody’s taxes across the board(esp. Corporate tax rates) and reduce spending. This of course will never happen.

jeffn21 on February 4, 2010 at 11:56 AM

Wonder what the stipulations are with this “tax credit?” Perhaps they have to employ the individual(s) for a year. Who knows. There has to be a catch, though.

There is probably a stipulation about the employee not being white as well… Or at least a certain % has to be various races.

jeffn21 on February 4, 2010 at 11:57 AM

I would have expected Bambi’s tax breaks to go only to businesses that hire the previously unemployed AND only to businesses that create green technology AND only to businesses that meet race and gender and sexual orientation quotas AND only to businesses that are unionized AND only to businesses that contributed to the DNC (that last part would not be publicized.)

PackerBronco on February 4, 2010 at 10:44 AM

Who’s to say they won’t, once all the regulations are written.

MarkTheGreat on February 4, 2010 at 11:59 AM

I don’t expect to see much in the way of significant rehiring for quite some time, no matter what incentive approaches are taken. Business does not trust anything these politicians do presently, with good reason.

Yoop on February 4, 2010 at 11:52 AM

Yep. This administration is managing to pi$$off just about everyone including Wall Street. Now Barry wants to use TARP fund for banks to lend to small businesses. Imagine what kind of strings would be attached to that deal.

Yesterday I heard an interview with an economist discussing the NFP numbers to be released tomorrow. During the discussion he pointed out that we need to see positive employment numbers in the area of +300,000-400,000 per month to make up for what we’ve lost.

Under the circumstances I don’t see that happening especially with the animosity this administration demonstrates toward the private sector.

Cody1991 on February 4, 2010 at 12:02 PM

2 seconds of logical reasoning to a complete economic layman is enough to realize that the tax credit won’t be enough incentive to hire new employees. And we’re supposed to believe that the POTUS can’t assemble enough geniuses to figure this fact out after weeks/months? This don’t make sense. Like Ayn Rand said in Atlas Shrugged “Whenever you see a contradiction, question the premises.” The premise to this contradiction is that the POTUS wants to spur more hiring. If you correct that false premise, the contradiction goes away.

birdman on February 4, 2010 at 12:03 PM

There is probably a stipulation about the employee not being white as well… Or at least a certain % has to be various races.

jeffn21 on February 4, 2010 at 11:57 AM

Yes, that is what I was thinking, and I suspect there is some similar qualifier with the TARP funds Barfy wants to use for small business loans.

Cody1991 on February 4, 2010 at 12:05 PM

If allowed to function, free market capitalism is a self-correcting system which brings prosperity wherever it has been practiced.

Dictators hate free markets because they lose control as the markets self-adjust to changing circumstances. These adjustments create winners and losers which is demonized as “unfair” and justify the dictators interference in, and control of, the markets to favor the despot’s favored constituency.

Whenever I hear a politician say this or that is “unfair”, or we must do this or that to “save the children”, I know that the politico is playing to the emotions of the current losers in order to expand their own power.

Dale on February 4, 2010 at 12:07 PM

“I don’t know anybody in business who hires an employee because they’re going to get a tax break,” Mr. Thompson said at a House Ways and Means Committee hearing with Treasury Secretary Timothy F. Geithner. “People hire employees because they have work to do.”

Among Obama’s many problems is that he’s never been a guy in business.

Obama: “What’s business? Is that anything like community organizing?”

BuckeyeSam on February 4, 2010 at 12:08 PM

Dow down 172. Why is the market tanking this morning? It is the “unexpected” unemployment numbers?

Johnnyreb on February 4, 2010 at 10:46 AM

Some of it appears to be nervousness over the sharp increase in credit default swaps being purchased on a bunch of foreign debt. Looks like somebody’s up to something — and probably not anything good.

AZCoyote on February 4, 2010 at 12:10 PM

We can have a real recovery if Obama would just get out of the way.

Exactly.

Pablo Snooze on February 4, 2010 at 12:10 PM

I still maintain that Obama’s intelligence is below the average of a college grad, and that he doesn’t even possess the average smarts. I have seen no proof to the contrary.

Yoop on February 4, 2010 at 11:39 AM

Aw, c’mon. Didn’t you see the tape of Barry telling that Kardashian chick that he’s a big fan of her “great” reality show? There’s your proof right there. What kind of deep-thinking, superior intellect doesn’t spend his time watching that kind of mindless crap?

AZCoyote on February 4, 2010 at 12:14 PM

you get to make a profit on it,

Maybe an accounting profit, but it’s due to an artificial lowering of employment costs.

We should be questioning the sustainability of these jobs. Or maybe that’s the point — create an entire additional voting bloc of people whose jobs evaporate when economic rationality is restored, and make sure they know for whom they should vote…

DrSteve on February 4, 2010 at 12:28 PM

Ed,
I agree with the overall assessment, but I have to take exception to this line:

At least some of this makes sense, especially the elimination of capital-gains taxes on small business investment

As a small business owner, CG tax cuts/elimination really don’t do much for me or for many other small businesses. When I sell an asset (like a used piece of equipment or my entire company), having a CG break makes a ton of sense because I get to keep more of the sales price.

BUT, my profits from providing services and/or selling products aren’t subject to CG taxes. They’re taxed as ordinary income. You want me to have more funds available to invest in growth? Cut the taxes I actually pay every year and I’ll put more of that money to work in the economy, I’ll feel better about hiring more people (even ahead of overwhelming demand) and I’ll be willing to take more risks.

Will a CG cut entice me to INVEST in another small business? Perhaps, but by the time I would realize a gain on the sale of the asset I invest in, it will be at least one year (rules of CG taxes) AND there’s no telling what the tax climate will be in a year.

My formula is pretty simple for DC:
1) Cut spending so you can keep from raising taxes OR, better yet, cut taxes.
2) Take a year off so you’ll quit making things worse
3) Go back to #1 and start over

Mark
Small Business owner and unabashed believer in the power of the free markets & capitalism

mctowler on February 4, 2010 at 12:34 PM

Small business owner here (in IL!). This will have no effect on hiring, anywhere. The mere fact that The One suggested it shows the dearth of business experience surrounding him. Just more Keynesian nonsense from a group who thinks that they have power over the economy.

Hucklebuck on February 4, 2010 at 12:59 PM

I’m wondering what the name of the impending depression is going to be. Since we’ve already had the “Great Depression”, what’s this one going to be called? The Ginormous Depression?

Dominion on February 4, 2010 at 1:02 PM

Perhaps I’m looking at this from a different angle, yet I can’t get away from some nagging concerns about the underlying motives for the Obama administration coming up with such a pathetically low dollar amount incentive for employment tax credits.

Could it be that the whole thing is, potentially, a Trojan Horse agenda to open the door for organized labor to invade and take over a large sector of private enterprise? That every employer who claims even one dollar of employment tax credits will ultimately be required to convert the “shop” or business into a union shop/business?

Look at the banking and auto manufacturing industries. Obama and his administration now “own” them, and are dictating operating policies and management wages, etc., under the premise that these businesses were saved via our tax dollars. It’s not out of the realm of possibility that this same attitude by the feds could extend to privately held smaller companies that might accept federal tax credits or incentive dollars.

And Andy Stern, head of the SEIU, has been privileged to have the inside track on all labor related policies due to weekly White House meetings. Could it be that there’s an ultimate agenda to force smaller businesses to accept union representation for their employees?

It would probably start out with the feds initially claiming the mantel, then later announcing that it’s a job more appropriately handled by the “private sector”, i.e. via SEIU, AFL-CIO, IBEW, etc. Ultimately the labor unions would have the opportunity to step in to claim the biggest chunk of the employment sector that has eluded them so far: privately held, entrepeneurial businesses.

Perhaps I’m simply too cynical lately, although I prefer “pragmatic” to cynical descriptively. Still, with all that has happened with Obama’s administration in the past year, and the Democrat controlled Congress since 2007, I just can’t ignore the overwhelming feeling that there’s much more going on behind closed doors than simply weekly meetings with Stern for the benefit of the SEIU exclusively. Union membership has dramatically dropped off in the past two or three decades, and the labor unions have been scrambling big time to reverse that trend.

KendraWilder on February 4, 2010 at 1:14 PM

Well, this is just begging to be exploited. Someone hires me for the summer. Boom $5,000. We agree on $10/hr, but for the first few weeks, I only work for $9/hr. Then I get a “raise” to the $10/hr that we agreed on. Boom $5,000. Middle of September, I show “promising potential” and have a good “work ethic” I get a raise to $11/hr for the last week that I work there. Boom $5,000.

End result is, this company that hired me for the summer, paid me $4~5K, gets $15K from uncle Sam, plus the work that I did, which, at least in a good year, is worth $5,000.

Wow, I actually might get hired this summer.

Fizzmaister on February 4, 2010 at 1:35 PM

When any politician or even a talking head mentions tax credits, it raises a Red Flag for me. What I hear is there is a tax in place they don’t want to get rid of or its a way to force industry in a certain direction.
Take the cigarette tax for instance. It is a way to get people to accept an increase tax on a product they demonized, but they don’t want to make the product illegal to purchase because the revenue from the tax would go away.
Or…lets take gas. They have a tax to artificially increase the price on a product and then provide a credit for an accepted alternative energy source to artificially lower its price.

lwssdd on February 4, 2010 at 2:17 PM

Ah, but if you think businesses are just refusing to hire extra workers, then it makes sense to offer an incentive.

IOW, Obama doesn’t have a clue about how to run a business.

Of course, the bigger issue here is that Obama has no authority to take money repaid to the government after a bailout loan and spend it any purpose when the TARP bill requires that such repayments are used to pay down the national debt.

Fortunately, Sen. Judd Gregg is all over that issue.

tom on February 4, 2010 at 3:15 PM

Correct. Business gains far more from high productivity than from a tax credit. They may take a look, however, at the productivity levels to see if they are overstretching.

You can only do that for so long before suffering some consequences.

AnninCA on February 4, 2010 at 3:50 PM

Bulletin – Bulletin

Banks are not NOT lending money to businesses because they wish to hoard their cash. That does them no good and is NOT a motivation. They are a business and need to show a profit. Why then… because there is NO demand. Businesses are either hunkering down and keeping their powder dry because of the screaming uncertainty that exists and/or they have virtually NO confidence that this Obummer can turn things around. Therefore, they say, why incur more debt. So, business has no demand for their products and they in turn have no need to borrow money for working capital.

Not to mention, IF more regulations from Barney Frank and his crowd requires banks to make loans to businesses that do NOT qualify then we are looking at the next major turmoil in the economy within 6 months. Obummer needs to encourage business, not beat them up as he does banks etc. Encourage America and drop taxes for small business and cut regulations and you will light the fires of America’s fighting spirit and we will be out of this mess in no time. The dumb a$$ is doing everything wrong. What a clueless moron.

highninside on February 4, 2010 at 5:48 PM

You’re giving Obama the benefit of the doubt, Ed.

Why? You know better.

The $5000.00 tax credit is a ploy to make it sound like he’s trying to do things the “conservative” way. Then he can say down the road, we tried giving businesses tax relief. It didn’t work.

Why else would he do this? There is only one reasonable answer if it isn’t subterfuge. He would have to be a complete imbecile.

Saltysam on February 4, 2010 at 8:48 PM