Jobs Bill Won't Add Many Jobs

It sounds great: A big jobs bill that would hand President Barack Obama a badly needed victory and please Republicans with tax cuts at the same time. But there's a problem: It won't create many jobs.

Even the Obama administration acknowledges the legislation's centerpiece — a tax cut for businesses that hire unemployed workers — would work only on the margins.

As for the bill's effectiveness, tax experts and business leaders said companies are unlikely to hire workers just to receive a tax break. Before businesses start hiring, they need increased demand for their products, more work for their employees and more revenue to pay those workers.

"We're skeptical that it's going to be a big job creator," said Bill Rys, tax counsel for the National Federation of Independent Business. "There's certainly nothing wrong with giving a tax break to a business that's hired a new worker, especially in these tough times. But in terms of being an incentive to hire a lot of workers, we're skeptical."

Rick Klahsen, a tax expert at the accounting firm RSM McGladrey, said his clients need to see business pick up before they can hire more workers.

"If demand were increased, they are saying it will take care of itself because I will then have the motivation to go out and hire new employees," Klahsen said.

The bipartisan Senate plan would absolve companies of having to pay a 6.2 percent Social Security tax on the wages tax for the balance of 2010 for any workers they hire who had been unemployed for at least 60 days.

A company could save a maximum of $6,621 if it hired an unemployed worker after the bill is enacted and paid that worker at least $106,800 — the maximum amount of wages subject to Social Security taxes — by the end of the year. The company could get an additional $1,000 on its 2011 tax return if it kept the new worker for at least a full year.

The nonpartisan Congressional Budget Office recently concluded that reducing Social Security taxes for companies that add workers would be among the most efficient ways for the government to create jobs. However, in showing how difficult it is to create jobs through tax policy, CBO estimates that such a tax break would generate only eight to 18 full-time jobs per $1 million in tax breaks.