The Washington Post

Obama renews call for stimulus, highlighting tax breaks for businesses

The White House on Tuesday repeated its desire for a new round of economic stimulus, highlighting a previous proposal to spend more than $25 billion to offer tax breaks to companies to hire workers or pay them higher salaries.

The proposal, which appeared in President Obama’s 2013 budget request earlier this year, was included in a statement released Tuesday that focused on Obama’s demand that Congress immediately extend tax cuts for middle-class earners that are set to expire at the end of the year.

While the stimulus proposal was not the main thrust of the statement, its inclusion was noteworthy because it was the first mention the White House has made since Obama’s reelection of an initiative aimed at invigorating the weak economy.

The tax breaks would target small businesses and refund 10 percent of the cost of new payroll — in the form of new hiring or new wages — up to a total of $500,000 next year.

“This credit would help nearly 2 million small businesses and is focused on middle-class workers and small businesses,” officials said in the statement.

Obama has been under pressure from some Democrats and economists to renew the payroll tax cut that has been central to his economic policy for the past two years. The White House has said the payroll tax could be discussed as part of negotiations but has been noncommittal about whether it should be renewed.

The hiring subsidy would have a smaller impact than renewing the payroll tax cut but still would have a modest effect on economic growth, economists say.

Obama also reiterated Tuesday his call for allowing companies to deduct the full cost of investments from their taxes for another year — a proposal that would allow companies to save $50 billion next year on taxes, though independent budget analysts say the final cost would be about $5 billion.

The last time the country had a proposal similar to the hiring and wage subsidy was during the Carter administration, according to the Tax Policy Center. Research by the Labor Department found that few firms knew about the tax policy, but those that did increased employment notably.

“An incremental jobs credit could be a cost-effective way of raising employment in the short run,” the nonpartisan center said in a report this year. “The effectiveness of any jobs subsidy depends . . . on how employers perceive its potential benefits when making hiring decisions.”

Zachary A. Goldfarb is policy editor at The Washington Post.



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