Jobs Credit Talk May Delay Hiring

Posted by: John Tozzi on January 29, 2010

If the government plans to give a tax credit for new hires to small businesses, as President Obama indicated Wednesday in his State of the Union address, Congress and the administration should move fast, because of comments like this one:

Maury

January 28, 2010 07:58 PM

I’m a small business owner who is considering hiring new workers. However, I am holding off hiring in hopes of getting some incentive from the government.

Talking about a jobs tax credit, without actually passing one, might be worse than not considering it at all. The NY Times’s Catherine Rampell noted this in a story in October:

The biggest fear among some, though, is that the proposal might unintentionally reduce job opportunities if it sits in Washington too long without passing.

“Particularly for big employers, if they think a job creation tax credit is in the offing, it could certainly be an incentive to delay hiring,” said Lee E. Ohanian, an economics professor at the University of California, Los Angeles. “That means it could have the perverse effect of actually prolonging the recession.”

Most business owners make staffing decisions more directly based on demand for their products or services. If they need people to work another factory shift or answer the phones, they’re not going to wait for a tax credit. But there are no doubt plenty companies on the edge of hiring new workers who, like Maury, are waiting to see if there’s an incentive coming.

Reader Comments

Andy

January 29, 2010 2:31 PM

I am a small business owner as well; and it is funny that I ran into this article while searching for a timeline of when to expect the credit. I was going to hire at least one of my sub-contractors this week, but may put it on hold because of this tax credit talk. I want details as to when this may go into effect, how long they must be employed, how many hours a week new hires must work, etc.

Carol Cross

January 29, 2010 4:15 PM

Obviously, the jobs tax credit for employers is intended as both a short term AND a long term solution to the LOSS of middle-class jobs created by the Global Economy and our long-lasting unsolved trade deficit.

President Obama couldn't go so far as to say "buy American" (this is politically incorrect) but he certainly must hope that some of these jobs that have been lost to other countries will come back home if those multi-national American Corporations see the value of bringing those jobs back to this country -- maybe to compete in markets that will be invaded by the so-called "small business man" who will compete with multi-national big businesses, also in the global economy. (Maybe business, like charity, should begin at home)

I blame the general media for not explaining to the general public how our LONG EXISTING trade deficit in this Global Economy has negatively impacted our jobs in this country.

Although, big networks like CNN report the demonstrations outside of the trade talks, etc.. they don't explain WHY these people are demonstrating and the issues involved. It is only on PBS that the American People are educated with both sides of an issue.

Apparently, it is not in the best interests of government and the corporate media to educate the American people to understand the origins of the problems that our country faces today.

President Obama inherited these problems and I believe he is doing the best he can to solve them.

Maybe! Because the job credit could work toward solving the long-term problem of jobs for Americans, it will have to be carefully drafted and it will take time. It is certainly an employers market, right now, isn't it? - for both small business and big business employers.

Susan Martin

February 1, 2010 10:57 AM

Of course we can't be sure it will pass, but according to the NY Times article it is meant to be retroactive to the beginning of the year.

One thing we can do is put pressure on our representatives to pass legislation that directly helps small businesses as quickly as they acted to help out the banks.

http://www.business-sanity.com

Van Elkins, CPA

February 2, 2010 11:30 AM

This is a pretty good idea. What we need is an incentive for small businesses to start hiring again. Small businesses create 65% of the jobs in this country.

Here’s my idea: Take the payroll number from a small business’s tax return (maybe under $25 million revenue), divide it by a certain number, and then use that factor to reduce the company’s income tax rate. So the more employees you have, the lower the company’s tax rate. Say you have 25 employees and a payroll of $1,000,000. Maybe that reduces your tax rate by 5%. This would not be a one-time or short-term deal. It would motivate small business owners to plow that tax savings back into the company to hire workers to grow their businesses, and they need to know it’s going to be there so they can plan for it.
http://www.vanelkins.com

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About

What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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