And by “tax cut” we mean subsidy.
See for whatever reason, straight-up cutting taxes is anathema to the current White House. Even though such a move would get cash into the hands of businesses and consumers immediately, it’s looked down upon by people who are into the stimulus, and the multiplicative effects of government spending.
Of course, the real reason politicians prefer subsidies to tax cuts is that the money from tax cuts isn’t directed, and politicians have big ideas about the best way to spend money. Cleaner cars are good, so we get Cash-For-Clunkers. Homeownership is good, so we get the $8,000 tax credit, which will be extended.
And so now we’re going to get a tax credit for businesses that create new jobs, according to NYT.
One version of the approach, to be unveiled next week by the Economic Policy Institute, a labour-oriented research organisation, would give employers a two-year tax credit if they increased the size of their work force or added significant hours of work (for example, making a part-time worker full time). Employers would receive a credit worth twice the first-year payroll tax for each new hire, amounting to several thousand dollars, depending on the new worker’s salary.
“It’s beautiful if it can be timed at a dire moment like this, when unemployment is way too high and appears to be going somewhat higher,” said Mr. Phelps, an economics professor at Columbia, lamenting that the president dropped it from the $787 billion stimulus plan approved in February. “But it’s a pity that this wasn’t done a year ago.”
So, like “Clunkers” and everything else, it’s a temporary adrenaline shot that, when expired, will probably leave many companies with bloated payrolls. But hey, that’s two years down the road. We can cliff-dive again then.
In a related story, the WSJ discusses the significance of the jobless rate on the Democrats prospects in 2010.
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