Friday, January 29, 2010

Washington turns to job creation

“Jobs must be our number-one focus in 2010,” President Obama told the nation last week. “That's why I'm calling for a new jobs bill tonight.”

Lawmakers in the House and Senate didn’t wait for the President’s directive, however. Even before Wednesday’s State of the Union address, several pieces of legislation had been introduced in earnest with the goal of creating jobs in the face of sobering unemployment numbers.

Sen. Al Franken (D-Minn) on Tuesday introduced the “Strengthening Our Economy Through Employment and Development” (SEED) Act (S. 2952), a measure that would reallocate $10 billion in TARP funds to spur jobs in the private and public sectors. Also called the “Cash for Jobs” bill, S.2952 provides $5 billion for wage subsidies to incentivize hiring in the private sector. The additional $5 billion will provide direct grants to states, local governments, and tribes to create green jobs.

The SEED Act has the potential to rapidly create up to 500,000 jobs in an efficient way and at a lower cost per job than other proposals, Franken says. “Cash for Jobs will rapidly create jobs in the private and public sector, encourage the expansion of small and medium-sized businesses, and increase the energy efficiency of public buildings. It will boost the economy where we need it most—on Main Street.”

Also on Tuesday, Sen. Russ Feingold (D-Wisc.) introduced a bill (S. 2955) that would help businesses hire workers and reduce unemployment through the creation of a temporary jobs tax credit. The tax credit would enable employers to “hire new employees, expand work hours for their current workforce, or simply raise worker pay.”

Weeks earlier, in the House, Reps. Bob Etheridge (D-NC) and Steve Kagen (D-Wisc) introduced a bill that would provide a refundable tax credit to businesses expanding their payrolls. The "Hiring Incentives to Reinvest and Incentivize New Growth (HIRING) Act" (H.R. 4437), introduced January 13, would provide a 15-percent refundable tax credit to businesses that expand their payroll by at least three percent in any calendar quarter of 2010, and a 10 percent refundable tax credit to businesses that expand their payroll by at least five percent in any calendar quarter of 2011.

Finally, on Thursday, President Obama unveiled his own “Small Business Jobs and Wages Tax Credit” proposal, designed to provide a cost-effective, immediate jump-start to job creation and wage growth. “The credit will provide American businesses with a powerful short-term incentive to not only create good jobs but to increase wages and hours for Americans with jobs who face ongoing economic uncertainty in the current environment,” according to the White House. Among the key provisions:

  • Employers would receive a tax credit of up to $5,000 against their payroll taxes for every net new employee they hire in 2010. The credit would give employers an incentive to add jobs or accelerate the hiring they would have done later in the future.
  • Businesses will receive a bonus 6.2-percent tax credit on aggregate wages in excess of inflation—reimbursing the employer for the Social Security payroll taxes they pay on those payroll increases. This provides firms with an incentive to increase wages or work hours for existing employees as well as hire new employees at a higher wage.
  • All firms with net employment increases will be eligible for these credits. But to ensure that small businesses receive the bulk of the incentive to hire, the maximum credit will be limited to $500,000 per business.
  • Employers could receive the tax credit on a quarterly estimated basis. This option helps get money in the hands of employers earlier in the year, and could help increase awareness of the credit and provides an early incentive to hire.

According to a Congressional Budget Office report, tax breaks along the lines proposed in these measures would be among the most efficient and effective ways to spur employment. The CBO estimated a jobs tax credit would boost gross domestic product by as much as $1.30 for every dollar spent and would increase employment by as much as 18 net full-time equivalent jobs for every million dollars invested through the credit. The Economic Policy Institute, a left-leaning think tank, projected that a jobs tax credit proposal would result in an increase of more than five million jobs over the next two years.

What’s more, a job creation tax credit could garner bipartisan support, a rare achievement in today’s political climate. Republican minority whip Eric Cantor (R-Va) has expressed support for such measures, Etheridge noted.

Right now, all eyes are on the Senate. “The House has passed a jobs bill,” Obama noted on Wednesday night. (The House narrowly passed H.R. 2847, the Jobs for Main Street Act, on December 16.) “As the first order of business this year, I urge the Senate to do the same.”

“I know they will,” Obama stated emphatically. “People are out of work. They're hurting. They need our help. I want a jobs bill on my desk without delay.”

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