Sens. Max Baucus and Charles Grassley released a wide-ranging jobs bill, which everybody agrees has a decent chance to get bipartisan support and a better chance to create a disappointing number of jobs. The bill provides an exemption from Social Security payroll taxes for every worker hired in 2010. The exemption is capped at $106,800. It also provides a $1000 tax credit reward for keeping the employer on payroll for more than a year. The cost: $13 billion over 10 years. The bill also allows companies to write off up to $250,000 of certain capital expenses.
The problem, everybody seems to agree, is that the reason most employers aren't hiring is not that they are afraid of incurring more payroll taxes. Instead, it's that there is not enough demand for their products or services to boost profits they would use to hire more workers.
The derision for this bipartisan bill is -- sigh -- bipartisan. Hugh Hewitt scoffs at the idea that employers will respond to a $1000 gimmick. Steve Benen and other liberals think the bill is way too small to work. I've been back and forth on the potential success of tax incentives for hires. My history of writing about hiring tax credits is long, but the history of their unqualified success is short. When the CBO looked at the 1970s New Jobs Tax Credit, they found ... well, very little evidence to prove either its efficacy or wastefulness.
A bit of cheeriness to end: CBO's economic models project that the payroll tax credit is one of the more efficient ways to stimulate employment -- bested only by increasing aid to the unemployed (who'll spend it quickly, making unemployment insurance a no-brainer way to lift sagging demand).