If Eric Cantor and Robert Reich agree, then this idea could be the best thing since Spam. Or maybe not:
The idea of a tax credit for companies that create new jobs, something the federal government has not tried since the 1970s, is gaining support among economists and Washington officials grappling with the highest unemployment in a generation.
The proposal has some bipartisan appeal among politicians eager both to help their unemployed constituents and to encourage small-business development. Legislators on Capitol Hill and President Obama’s economic team have been quietly researching the policy for several weeks.
“There is a lot of traction for this kind of idea,” said Representative Eric Cantor of Virginia, the Republican whip. “If the White House will take the lead on this, I’m fairly positive it would be welcomed in a bipartisan fashion.”
In addition to the economists working on the proposal, some heavyweights support the concept, including the Nobel laureate Edmund S. Phelps, Dani Rodrik of Harvard and former Labor Secretary Robert B. Reich. NYT
But of course, there is opposition:
“Some bad ideas never go away,” said Howard Gleckman, a senior research associate at the Urban Institute. “It’s just providing incentives to lots of companies that probably aren’t going to make it in the end anyway.”
Under the proposal from Mr. Bartik and Mr. Bishop, the credit in the first year would equal 15.3 percent of the cost of adding an employee. In the second year, it would fall to about 10.2 percent.
For example, hiring a worker might cost a small business $50,000 annually. But with the tax credit, the cost would fall to $42,350 in the first year, and then be $44,900 the next year. After that, the cost would return to $50,000.
The credit would apply only to the portion of an employee’s salary under $106,800. Lowering the cap further, however, could provide an even greater benefit to low-wage, unskilled workers.
