Repeat After Me: Tax Credit for Employers is a Dumb Idea When These Guys Have No Customers

The definition of insanity is to keep doing the same thing over and over again and expect different outcomes. The different versions of the jobs bills circulating in Washington DC these days are perfect example of that point.

See for instance, the jobs tax credit for hiring new workers idea. What a brilliant example of bipartisan nonsense that is. Pushed by President Obama during his State of the Union address earlier this month and most recently picked up by Senators Schumer and Hatch.

Still no one seems to wonder, why would employers pay a new worker $40,000 to earn a $5,000 credit unless that worker generates at least $35,000 of revenue? Even when the advice comes from economists at the National Federation of Independent Businesses, the largest association of small business owners in the country, it is ignored by the President and Congress.

This about it this way:

If your business is slow, and your customers are not buying your goods and services, it is likely that your tax liability will be significantly reduced or nonexistent even. No tax liability, no need for a tax credit. Better yet, no customers, no need for employees, tax credit or not. (Duh)

Of course the same can be said about Obama’s proposal to use $30 billion of the repaid TARP money to prop up small business lending. There will be no demand for loans as long as the economy is doing poorly and customers are not buying goods and services produced by small businesses.

If Obama wants to help small businesses he should stop pretending to give with one hand while stealing big time from the other hand. What do I mean? Well, he gives useless tax credits on the one hand but is proposing big tax increases for those earning more than $250,000 a year on the other, including all the small business owners that report their business income as individual income. These guys aren’t going to take loans and invest in their businesses and hire new employees if they are going to be hammered with tax the following year.