February 3, 2010

A Phony Incentive for Hiring

Justin Katz

Does anybody believe this will work?

The deal would give employers a $2,000 tax credit for each new full-time worker hired between July 1, 2010, and Dec. 31, 2011. The tax credit would apply for the year the hiring takes place. ...

There are controls on the tax credit. The newly hired workers must have collected unemployment, received welfare benefits, or graduated from college in the previous 24 months.

The employee must work 30 hours a week or more and earn at least 250 percent of the state’s minimum wage. Doing the math, that’s about $18.50 an hour, or close to $40,000 a year for a 40-hour-a-week worker. He or she must also be granted access to group health-insurance benefits, if interested.

A small one-time tax credit in exchange for a median-cost permanent employee? About the only businesses that are apt to take advantage of the credit are those that already planned to hire, it seems to me. In other words, they'll hire when the numbers make sense, and the numbers are well beyond the reach of such a credit.

Companies aren't going to take on additional burdens or additional risks for $2,000. What they need is a reason to believe the state to be worthy of investment and the local economy to be primed for explosion. Under those circumstances, the extra two grand might spur them to get ahead of the hiring curve (although not likely). As it is, this is like offering a free after-dinner mint to get passengers to make dinner reservations on a sinking ship.

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I don't think it was meant to work in the long run but it's a good use of stimulus money to at least stir up the silt from the bed.

It's definitely not a fix all but the largest complaint from businesses is that RI is a very unfriendly corporate tax state and considering that 70% of RI businesses (currently in state) are small business, those are the ones hit the hardest.

Our unemployment still hovers around 12.9% but that doesn't include what rolled off the table so yes, it's a good thing and no one should confuse a patch for a fix.

The temporary tax credit may push a business to hire an employee but unless there are customers to keep that business busy, the credit 'gift' now becomes a 'bill'.

Posted by: Roland at February 3, 2010 11:02 AM

Brilliant political move. On the surface, it looks like it will create jobs and Carcieri can beat his chest about it.
In reality, you've probably nailed it.

Posted by: rhody at February 3, 2010 11:43 AM

Just another gimmick to make politicians look like they're "doing something" about unemployment.

If Rhode Island's politicians really wanted to do something about unemployment, they'd massively reduce taxes (to make RI amongst the most tax-competitive states instead of one of the least) -- and lowering the state budget to match; enact right-to-work legislation; expel the teachers unions from Rhode Island and provide universal vouchers, putting the state on a path toward providing a world-class education system for its children.

Won't happen, because the Democrat General Assembly sees its primary role as raising revenue to feed the public sector union and poverty industry interests, not bringing prosperity to Rhode Island.

So if I were a business in Rhode Island, the only new hiring I'd be considering is new hires in my new state, after transferring operations out of Rhode Island.

Posted by: Ragin' Rhode Islander at February 3, 2010 12:47 PM

I am a middle aged woman who would like one of those well paying jobs.

I have not collected unemployment,been on welfare or graduated from college with the time specified. I guess I don't matter. I can't compete with people who have government subsidies to get hired but it's okay if my hardworking husband has to help pay those subsidies even though I couldn't get one of those jobs.

It isn't at all fair,but then what is?

Posted by: helen at February 4, 2010 2:35 AM

None of these tax credit schemes will fix the problem. If you want to stimulate the economy the only thing that will work is large tax cuts (and large cuts in government spending). Since 70% of the U.S. economy is consumer spending, allowing consumers to keep their own money, is the only way to get them to spend. Making retirement accounts tax free would make people more optomistic about the future also.

Posted by: David Bibeault at February 10, 2010 12:09 PM
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