EPI on October 20 unveiled a proposal for a tax credit that could create millions of jobs over the next two years.
Labor market experts Timothy J. Bartik at the W.E. Upjohn Institute for Employment Research and John H. Bishop at Cornell University outline the details of the policy initiative in two papers: The job creation tax credit–Dismal projections for employment call for a quick, efficient, and effective response and Complementing recovery policies with a jobs creation tax credit.
The cost of the proposed program would be relatively low: About half of the estimated $28 billion in net revenue losses to the federal government could be recouped in lower spending on unemployment insurance, Medicaid spending, and other safety net programs.
The EPI job creation tax credit proposal would:
• Target businesses, non-profits, and even governments that add to payroll over the next two years;
• Target a wide range of jobs across economic sectors and across all kinds of firms, regardless of size or current profitability;
• Be based on the portion of wages subject to Social Security payroll taxes ($106,800 in 2009) and would not credit very high wage earners, including CEOs; and
• Be temporary, only to be used when the labor market is weakest.
“Clearly, job creation should be a top priority of policymakers now,” said Bartik. The credit would cover 15% of expanded payroll costs in 2010 and 10% in 2011. The authors estimate it would create 2.8 million jobs in 2010 and 2.3 million in 2011.
In two companion pieces, EPI presents a five-part approach to large-scale job creation, and also examines the underlying causes and solutions of the current unemployment crisis.