Not Another New Jobs Tax Credit!!!

Washington likes quick fixes to big problems. Unfortunately, quick fixes rarely benefit the economy. In 1977, in behind-the-scenes discussions with members of Congress, I argued against the New Jobs Tax Credit. It was obvious that the credit would reward new hires long after the decision to hire had been made for other reasons. We spent $5.7 billion of taxpayer money on it anyway so political leaders had something to show the voters back home. No new jobs were created, although proving that is almost impossible.

The White House is considering reviving the New Jobs Tax Credit for to ward off an election debacle 13 months from now. How much is that worth? Replicating the New Jobs Tax Credit would cost about $13 billion. President-elect Obama proposed a smaller, but refundable $3,000 credit in last year’s campaign. Last January, he dropped it from his stimulus proposal under pressure from Democratic congressional leaders. Now that the unemployment rate is about to top 10%, it’s back on the table.

Jimmy Carter’s top tax economist, Deputy Assistant Treasury Secretary Emil Sunley, recounted the New Jobs Tax Credit debate here in an excerpt from The Economics of Taxation, by Henry Aaron and Michael Boskin. Click on the link at the bottom for the complete chapter.

This Congressional Research Service report has a good synopsis on page 5. Check out the studies cited in footnote 6.

Howard Gleckman of the Urban-Brookings Tax Policy Center blogged well on this on January 5 and on January 9, 2009.

Here’s a proponent of reviving the New Jobs Tax Credit.

About Pete Davis 99 Articles

Affiliation: Davis Capital Investment Ideas

Pete Davis advises Wall Street money managers on Washington policy developments that affect the financial markets. President of his own consulting firm since 1992, Davis Capital Investment Ideas, he draws on 11 years of experience as a Capitol Hill economist with the Joint Committee on Taxation (1974-1981), the Senate Budget Committee (1981-1983), and Senator Robert C. Byrd (1992). He worked in the House and Senate, and for Republicans and Democrats.

Davis brought the first computer policy model, the Treasury Individual Income Tax Model, to Capitol Hill in early 1974, when he became a revenue estimator on the Joint Committee on Taxation. He formulated the 1975 rebate, the earned income tax credit, the 1976 estate tax rates, the 1978 marginal tax rates, and the Roth-Kemp tax cut. He left Capitol Hill in 1983 for the Washington Research Office of Prudential-Bache Securities, where he advised investors for seven years.

Davis has long written a newsletter on the Washington-Wall Street connection for his clients; Capital Gains and Games is his first foray into the blogosphere.

Visit: Capital Gains and Games

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