Maybe I need some direction here. I don’t know. But I can not get my head wrapped around how giving businesses a tax break from hiring unemployed workers is going to help anything.
In fact, the Senate proposition will exempt companies from paying the employer’s share of Social Security payroll taxes for new workers hired this year, as long as those people had been unemployed at least 60 days.
Hold on. For starters this is only for workers hired this year.
Next, and I think this one is big. Are companies only going to accept applications based on individuals being unemployed for 60 days or more? Wouldn’t this be discrimination? Companies can’t hire (or deny employment of) people based on their religion, age, race…etc. But now they could turn down someone that has been unemployed for 45 days and instead hire someone that has been unemployed for 62 days.
I would have to imagine that there will lawsuits all over the place.
But back to the basic discussion of the tax credit. Here is my basic though – If companies are not hiring right now, then why would they for a little tax break.
Isn’t it pretty basic thinking. Jobs are not being created right now for a couple reasons. But let’s look at it in the most basic form.
When do companies hire? They hire when the demand for the product they are producing or the service the are providing goes up. If there is no demand, no matter what kind of break they get, they won’t be hiring.
If I make widgets and people want to stop buying my widgets then when that demand gets low enough I have to start letting people go. As the demand for those widgets rise again, I can start bringing back employees to meet the demand. And hopefully the demand for those widgets continues to grow so that I can expand my business.
If the demand for my widgets has flat lined and I am maintaining the number of employees that I have to serve that demand, why would I hire more people due to a little tax break?
It really makes no sense. Tax break or no tax break they are still out of a lot of money by having to pay that employee to work there. And the tax break is not going to cover all those expenses. NOR SHOULD THEY.
So, once again this seems to be backward thinking. Or at best, in my opinion, this is a way for Obama to work with Republicans to bring something forward. Nobody can really expect this to work, but instead it is a feel good thing that everyone can say “yeah, we did something to help, we are offering this tax break”.
What really needs to happen is the all companies, large and small, need huge tax breaks. With this saved money many things can happen. None of which should be mandated by the government.
Current Employees Given Raises – The more money people have in their pocket, the more they are going to spend. The more money people are spending, the better that is for the economy.
Able To Expand Some What – Maybe a company has been thinking of expanding but just doesn’t have the capital. More cash in the companies pocket, the more they can work with. And if they are thinking of expanding in some fashion, then that would equal more jobs. And now, this is where the proposed tax credit could become useful.
While I think this is a good thing to do, I just don’t see companies hiring people right now because they will get a tax credit. It is a good thing, but it a little to far down the stream to help right now. Once things get moving again, it may help. But not right now.
What do you think? Am I off base?
