With the U.S. nearly two years into the worst economic downturn since the Great Depression and 10.2 percent unemployment nationwide, U.S. Senators Kirsten Gillibrand (D-NY), Russ Feingold (D-WI), Bob Casey (D-PA), Carl Levin (D-MI), Joe Lieberman (I-CT), Debbie Stabenow (D-MI), and Jeanne Shaheen (D-NH) today called for a tax credit for businesses that create new jobs. Ahead of Thursday's White House Job Summit, the Senators urged President Obama to propose a job creation tax credit as part of ongoing economic recovery efforts. The Economic Policy Institute (EPI) estimates that a job creation tax credit could create more than five million new jobs in two years.
"Families across New York have been hit hard by this economic crisis, leaving thousands without jobs and reduced income to pay bills and put food on the table," Senator Gillibrand said. "The job creation tax credit would encourage businesses to begin hiring immediately instead of waiting for the economy to stabilize further - a delay which puts the recovery itself at risk. It would create millions of new jobs at a time when unemployment is continuing to rise and nearly 850,000 New Yorkers are out work. Giving the private sector an incentive to create jobs is a good way to strengthen the economy, providing jobs for those hit hardest by this recession."
"I am pleased the administration is holding this jobs summit to develop innovative ways to get Americans back to work in this down economy," Senator Feingold said. "In any package of proposals coming out of this conference, I urge the administration and business leaders to include a jobs tax credit that will help businesses hire workers and bring down unemployment. I have heard positive feedback from Wisconsin businesses about a jobs tax credit and momentum continues to grow in the Senate behind this proposal."
"New regional unemployment rate data reminds us that while progress is being made to put the economy back on track, there is still a lot of bad news for workers and their families," said Senator Casey. "We must explore all options for how the government can help spur job creation, especially among small businesses. The job creation tax credit should be high on that list. And I am pleased that President Obama will visit Pennsylvania on Friday to keep the focus on job creation."
"I welcome the president's initiative in bringing key stakeholders to the table, I look forward to continuing to work with him and other members of Congress on legislative solutions that will put Americans back at work again," Senator Levin said. "My state of Michigan has been the hardest hit by the plight of unemployment, and my constituents remind me every day that they want to be back at work and supporting their families. The jobs tax credit is a proven tool that will help us reach this goal."
"A new jobs tax credit is a cost efficient way to create incentives for the private sector to put our citizens back to work," Senator Lieberman said. "I applaud the President for using tomorrow's conference to focus attention on the unemployed, and I sincerely hope that we can continue to work together to address this critical problem."
"As Michigan families and people across the country continue to struggle with high unemployment, we must encourage businesses to put people back to work," said Senator Stabenow. "A tax credit will do just that by providing businesses with a direct incentive to create new jobs immediately and speed up the economic recovery. As President Obama meets with key leaders at the jobs forum this week I encourage him to support this tax credit and other initiatives that promote job creation."
Jobless Americans are desperate to get back to work, and job creation must be our top priority as we work to fix the economy," said Senator Shaheen. "A limited and very temporary tax credit for businesses that create jobs would be an effective way to jumpstart hiring in New Hampshire and across the country."
The Senators believe that the job creation tax credit, with appropriate safeguards, is one of the most efficient ways to create a large number of jobs quickly. Any proposal should provide funds for enforcement and impose significant penalties against companies that attempt to engage in sham hires in order to claim a tax credit to which they are not entitled. Such a measure not only is an efficient way to create a large number of jobs quickly, but also bolster long-term economic recovery investments from high speed real and health care information technology to rural broadband and a smart energy grid.
While the American Recovery and Reinvestment Act has created or saved at least 600,000 jobs already, the job market is traditionally the last part of the economy to recover from a recession.
Unemployment started rising in the spring of 2007 and has now more than doubled to 10.2 percent nationwide. The underemployment rate, which includes people who are working part-time but want full-time work, is 17 percent, or 26.6 million people. Right now, the U.S. is experiencing an alarming rate of long-term unemployment - 5.4 million people have been jobless for more than six months, representing 3.5 percent of the workforce.
Since the recession began in December 2007, 8 million jobs have been lost, but with population increases, 127,000 jobs must be created each month just to keep unemployment from rising. To date, 10.7 million jobs must be created to get unemployment back to where it was before the recession started. In addition, high unemployment affects those with jobs too, since many workers are facing furloughs, reduced hours, and losses in benefits. Gallup reports that a third of workers fear their wages will be reduced and a survey by Hart Research Associated found that 44 percent of households have already experienced job loss or cuts to pay or hours.
Specifically, the job creation tax credit proposal from EPI would give businesses a credit of 15 percent of expanded payroll costs in 2010, creating nearly 3 million jobs, and 10 percent in 2011, creating more than 2 million jobs, generating an economic return of more than $2 per dollar of cost and approximately $5,400 per new job.
The job creation tax credit would target businesses across economic sectors, regardless of size or profitability. Providing a larger credit the first year would incentivize firms to begin hiring immediately. In addition, employers would receive the tax credit as part of their quarterly report to the Internal Revenue Service (IRS). Since the credits in this proposal are based on payroll increases from the fiscal quarter prior to the adoption of the credit, it removes the incentive to fire and re-hire employees, characterizing them as new hires.
In their letter to President Obama, the Senators wrote, "We commend your leadership in holding a White House conference to address the situation of the millions of Americans who are struggling to find employment. We must take additional, immediate steps to create jobs. As you convene our nation's economic leaders to address the nation's growing unemployment, we write to urge you to include a jobs tax credit for businesses that create jobs in any package of proposals coming out of that conference. A jobs tax credit provides an effective way to rapidly generate job growth, and we strongly encourage you to include a jobs tax credit as part of any package you propose to turn our economy around and put Americans back to work."