Amid debates on deficits and the debt ceiling, Sen. Bob Casey argues that job creation should remain Washington's top priority.
To that end, as his first proposal in the new Congress, the Pennsylvania Democrat is introducing legislation to provide a tax credit to businesses that expand payrolls. The measure would grant firms a credit equal to 10 percent of annual payroll increases, with the benefit to any individual firm capped at $500,000. In a conference call with reporters Wednesday, Mr. Casey cited comments by economists including Mark Zandi, of Moody's, and Alan Blinder, a former vice chairman of the Federal Reserve, that such a credit would be a particularly effective stimulus for jobs.
Mr. Casey has introduced similar legislation in the past. He said that the need for his approach was heightened by the yearend expiration on the payroll tax cut.
"The economy is growing, creating jobs at a good pace, but not nearly good enough,'' Mr. Casey said. "We can't be successful in deficit reduction unless the economy is growing.''
You'll find the Casey staff's argument for the proposal after the jump:
The Casey argument:
"Economists believe that new jobs tax credits can provide a more substantial boost to job growth than other forms of fiscal stimulus. This is because new jobs tax credits incentivize precisely the desired behavior – hiring new employees or increasing payroll. In the past, the nonpartisan Congressional Budget Office has determined that a well-designed tax credit for increasing payroll is among the most effective policies for promoting growth and putting people back to work.[i] Economists Mark Zandi of Moody’s Analysts and Alan Blinder, former Vice Chairman of the Federal Reserve, have also touted the benefits of new jobs tax credits in recent years. In 2010, Dr. Zandi called it “the best idea currently under consideration for ensuring that the U.S. job machine kicks into full gear,”[ii] and, in 2011, Dr. Blinder said that – if he could do just one thing to stimulate the economy – he would implement a large-scale new jobs tax credit.[iii]
"Current proposals benefit from the lessons of past experiences with tax credits for adding workers or increasing payroll, which demonstrate that such credits are all the more effective to the extent that they are visible, straightforward, and provide significant benefits to businesses in a timely manner.[iv] Payroll tax credits have an advantage over general business tax credits in that they can be claimed quarterly, as well as by businesses not currently making a profit.[v] Moreover, providing credits for any payroll increases – hiring new workers, increasing hours or raising wages of existing employees – allows businesses flexibility to manage their workforces. Finally, using the payroll tax base as the basis for determining the value of the credit has the added benefit of targeting relief to middle- and lower-income workers, since credits would not be able to be claimed for increasing individual salaries beyond $113,700 in 2013.''