If the one-time tax credits for hiring accomplish anything it’s, uh, Jobs for Main Street!
Which is to say that a temporary, small credit for hiring an employee will hardly change an employer’s behavior, other than to perhaps prompt the filing of a form to qualify for the credit after the hiring of a worker who would have been hired in any case.
Congress should think about the big picture, beyond the 2010 elections. As the Tax Foundation concludes in a new special report, “The Importance of Tax Deferral and A Lower Corporate Tax Rate“:
• The United States is the only large economy that taxes corporate income worldwide with a tax rate exceeding 30 percent.
• During 2009, both Great Britain and Japan enacted territorial systems, giving their multinationals a major tax advantage over U.S.-based firms that are saddled with a worldwide system. Over 80 percent of developed nations now have territorial systems.
• Whether the U.S. moves to strengthen its worldwide system by repealing deferral or follows the international trend by adopting a territorial system, there will be unfortunate incentives created. In both cases, though, lowering our corporate tax rate will mitigate them.
• A reasonable upper-bound target might be a combined federal-state rate of roughly 25 percent, implying a federal corporate tax rate of roughly 20 percent.
These findings reinforce the NAM’s new economic analysis conducted by the Milken Institute, “Jobs for America,” which examined the U.S. corporate tax rate:
Reducing the U.S. corporate income tax rate to match the OECD average would trigger new growth. By 2019, it could boost real GDP by $375.5 billion (2.2 percent), create an additional 350,000 manufacturing jobs, and increase total employment by 2.13 million.
Two million jobs, eh? That’s a lot more than any temporary employment credit will ever achieve.
See also our NAM news release, “Manufacturers Disappointed with Senate Jobs Bill; Bill Doesn’t Go Far Enough to Create Jobs”
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