This Could Be the Worst Jobs Bill Yet

Senate Democrats have put together a new Jobs Bill. It's essentially a temporary payroll tax holiday for new employers who hire in the next two months. What does that mean? It means if you own a businesses and hire a worker before Christmas, you won't have to pay your portion of her payroll taxes, which is 6.2 percent of her wages, for another two years.

Sounds intriguing? A three-month payroll tax holiday that only applies to new workers sounds a bit small. But wait, it's even smaller than I initially thought. A catch, via Huffington Post:

To be eligible, businesses must certify that the U.S. employee is replacing an employee who had been performing similar duties overseas.

If this is nothing more than a Jobs Repatriation Bill, that's pretty sad. If you're a domestic company looking to add workers, this bill doesn't help you. If you're a multinational company looking to add workers, this bill won't interest you.

Businesses don't move call centers and IT infrastructure overseas because Bangalore labor is a few percentage points less expensive than San Jose. Businesses move call centers and IT infrastructure overseas by the hundreds because offshore labor is orders of magnitude less expensive. The United States offering a temporary payroll tax holiday for repatriated workers is like Dean and Deluca offering low-income workers an extra coffee sleeve on their overpriced joe. It's not a very competitive offer.

The bill pays for the payroll tax benefit by targeting companies who offshore labor. It would eliminate the deduction companies can take for business expenses that are associated with moving parts of the company overseas, Sam Stein reports. It would also punish companies who produce products in other countries and sell them in the United States, by repealing "deferral."

What's deferral? Let's back up a second. U.S. companies pay taxes on their income. If you're a baker who makes $100 selling to your Virginia neighborhood, you pay U.S. corporate income taxes on that $100. But what if you're a U.S. company that both makes and sells lots of stuff overseas? Currently, you can "defer," or delay, U.S. taxes on your overseas profits until they come back home, for example, as dividends.

Bottom line: this bill offers a tax break to multinational companies paid for by a tax hike on multinational companies.

Maybe we should tax employment at a lower rate, permanently. Maybe we should tax more corporate income, and at a lower rate. But this bill isn't about the long-term. It's an outsourcing debate wrapped in employment incentives. And that makes it a jobs bill that seems most focused on jobs created and saved in the first week of November.

I've put in a note to Sen. Durbin's office and will report back when I know more about the intent and language of the bill.

Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

The Blacksmith: A Short Film About Art Forged From Metal

"I'm exploiting the maximum of what you can ask a piece of metal to do."

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

Riding Unicycles in a Cave

"If you fall down and break your leg, there's no way out."

Video

Carrot: A Pitch-Perfect Satire of Tech

"It's not just a vegetable. It's what a vegetable should be."

Video

An Ingenious 360-Degree Time-Lapse

Watch the world become a cartoonishly small playground

Video

The Benefits of Living Alone on a Mountain

"You really have to love solitary time by yourself."

Video

The Rise of the Cat Tattoo

How a Brooklyn tattoo artist popularized the "cattoo"

More in Business

Just In