The Case for an Employer Tax Break

Op-ed in tHE Wall Street Journal, The Case for an Employer Tax Break: Temporary Tax Relief for Businesses Who Hire New Workers Can Energize the Economy, by Blair W. Effron (Centerview partners, New York):

Companies need more robust consumer spending to justify increased payrolls, but without increased payrolls, the consumer is less likely to spend. The way to break out is by enacting temporary tax credit for companies willing to reinvest in jobs.

To earn the credit, companies would have to demonstrate an increase in their U.S. employment levels (excluding the impact of acquisitions and divestitures) year-over-year. And to most effectively encourage businesses to hire new workers, the tax offset must come very close to equalling the additional payroll costs incurred, so the effect on company earnings is negligible. We remain in an environment where there is a reluctance to hire for long-term growth if it means short-term earnings dilution.

Ideally, this tax benefit would be available for the next two fiscal years. The consumer must be reactivated now, without further delay. With such a program, the accelerated benefit from creating more consumers should, over time, more than justify the incremental wage expense to companies after the tax offset is phased out.

Second, the impact of a two-year program on the federal deficit would be relatively modest. Using a conservative set of assumptions, an $18 billion annual program, which represents 10% of estimated corporate tax receipts in the next fiscal year (excluding the $4 billion benefit of increased individual income taxes) could create nearly 600,000 good-paying jobs at the national median income. And this approach to job creation—which would impact government receipts less than 1%—would be much less costly than the more traditional solution of direct government spending.

John R. Dundon, EA - www.1040.com/jd - Taxpayer Advocate - Enrolled with the United States Department of Treasury to Practice before the IRS - Under contract with the United States Department of Treasury as a Certified ITIN Acceptance Agent - Direct phone # 720-234-1177