Democrats balk at $30 billion tax credit for employers

Ed Morrissey
February 4, 2010

Barack Obama unveiled one policy in his State of the Union speech that initially sounded good to conservatives — a tax credit to incentivize hiring and wage increases in small businesses. He proposed a $5000 credit for every new hire or every wage increase, although he tied it rhetorically to a new loan-incentive program that keeps TARP in business:

We should start where most new jobs do – in small businesses, companies that begin when an entrepreneur takes a chance on a dream, or a worker decides its time she became her own boss.

Through sheer grit and determination, these companies have weathered the recession and are ready to grow. But when you talk to small business owners in places like Allentown, Pennsylvania or Elyria, Ohio, you find out that even though banks on Wall Street are lending again, they are mostly lending to bigger companies. But financing remains difficult for small business owners across the country.

So tonight, I’m proposing that we take $30 billion of the money Wall Street banks have repaid and use it to help community banks give small businesses the credit they need to stay afloat. I am also proposing a new small business tax credit – one that will go to over one million small businesses who hire new workers or raise wages. While we’re at it, let’s also eliminate all capital gains taxes on small business investment; and provide a tax incentive for all businesses, large and small, to invest in new plants and equipment.

At least some of this makes sense, especially the elimination of capital-gains taxes on small business investment. Many would argue for across-the-board cuts in CG taxes, or elimination of CG taxes entirely. Such an environment would spur more risk-taking of a healthy kind, as people put their money into the kind of new ventures and expansion that lead to actual job creation. Why give corporations a better tax break than individuals, after all, when both investor classes have the same impact?

The tax breaks for hiring and wage increases looks more like a gimmick than a policy, and even Obama’s allies in Congress scoff at it

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