A not very modest proposal.

[Pab Sungenis]

What's our big problem? Employment. Simply put, there is not enough economic activity to justify businesses hiring more people. Lack of work means a lack of income which means a lack of economic activity, which forms the vicious circle.

Here's a way to fuel economic activity properly, put people back to work, and help rebuild our middle class and small businesses. Best of all, it involves that magic wand the Republicans like to trot out: a tax cut. It should be, however, a very targeted tax cut!

I think small businesses (say, 100 employees or less) should be able to write off 150% of salaries and benefits paid to new employees (hired within the last two years) and 125% of all long term employees. Similar structure for larger companies but with a progressive scale similar to the income tax rates depending upon size of business down to 100% deductible for the largest corporations.

For example: let's say your company bills $500,000.00 a year. You have 5 employees that cost you $175,000.00 a year between them. You would only be taxed on $237,500.00 of income. You might even be tempted to bring on a new hire for an extra $25,000.00 a year to bring your company's taxable income down to $200,000.00 a year.

This will encourage businesses to put more of their income into the hands of their employees who in turn will spend that money meaning economic growth meaning more spending meaning more profits for the businesses.

Where now a corporation can stuff its money offshore, pay no tax on it, and have it do nobody here any good, this would encourage them to put the money to use.

So how do we pay for it? Simple. Get rid of the special tax rates on capital gains. Instead, you can make capital investments by small businesses 100% deductible and encourage them to put money into capital improvements the way the capital gains tax was intended to do but no longer does. For everything else, the increased economic growth spawned by these actions will pay for the rest in no time.

Thoughts?

[TheKentuckian]

1. I don't see where this would generate any demand, the problem is not that there is no money

to hire needed workers but that money doesn't see any need to add workers.

Plus, tax cuts are too damn hard to get off the books. Virtually any cut plays into the "shrink the pig" politics.

A tax increase will do more to spur hiring than any break. Discouraging hoarding may result in hiring despite lack of demand if paying some wages keeps them from paying out more.

[Pab Sungenis]

2. More money in the hands of workers

means more demand. The problem with the approach that's been taken in "tax cuts for the rich" and "tax cuts for businesses" is that they weren't tied to paying for employees.

[TheKentuckian]

3. I understand that, my concern is that the worker won't see it unless they get hired

and there is no reason to hire.

Your tax cut is more sound than most but there is still little to address front end demand.
A tax cut that might work is an income tax holiday for the first 50k or so, it would ding revenues all to hell but it would free up a few hundred a month for folks that might be spent.

I'd probably support your deal, if it made it intact to the floor but I'm not sure it would have much impact but you do protect current workers so they don't start firing just to hire to get cheaper employees. I'd rather not get caught up in subsidizing every employee on the employer side but if properly crafted, maybe it helps.