Friday, January 29, 2010

Another silly idea

President Obama will promote tax cuts for small businesses Friday as he continues his renewed focus on job creation, but some of the nation's job creators are dubious.

One sentence from his State of the Union address Wednesday night will become the focus of his visit to Baltimore: a $5,000 tax credit for each job created on a net basis in 2010, up to $500,000 per company.

The idea is to prod companies to hire more workers. Small companies also can raise wages or hours and be reimbursed for the Social Security payroll taxes. Either way, the White House says, tax cuts for small business should lower the cost of hiring workers.

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."

This will be as effective as "cash for clunkers". If you remember, most of that money ended up in the pockets of Japanese and Korean car manufacturers. And, more people ended upside down with more consumer debt and unaffordable new car loans.

No new jobs will be created, but they'll claim credit for millions.

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