Will a payroll tax cut mean more jobs?

A jobs sign in lures workers in Louisiana

TEXT OF STORY

Kai Ryssdal: President Obama being the president and all, he probably got an early peek at this morning's unemployment numbers. So he was ready. He said this morning, in some remarks in the Rose Garden, he's going to have a new jobs plan ready for everybody next week.

Our Washington bureau chief John Dimsdale has more on what's being talked about and whether it might do any good.


John Dimsdale: One idea the White House is reportedly considering is a temporary elimination of the payroll tax on employers.

Economist Tim Quinlan with Wells Fargo says, that'll help, because companies are flush with cashm and a payroll tax cut will encourage them to hire workers.

Tim Quinlan: But until now, businesses have not taken that step to add to payrolls, because there's a lot of uncertainty about what the costs of adding additional employee are going to be. So I think the president providing a little bit of clarification here can only be seen as a positive thing by markets.

But tax breaks risk increasing the deficit, which is why Robert Bixby of the Concord Coalition says they need to be temporary.

Robert Bixby: The problem is, once you lower a tax like that, it becomes very difficult to raise it again. And so, if you keep lowering taxes, the expectation is they're going to stay there, you might have a very serious deficit effect over time.

But will temporary stimulus do the trick? Stephen Moore, editorial writer for the Wall Street Journal, likens a short-term tax cut to the home buyers tax credit or Cash for Clunkers.

Stephen Moore: The problem we run into with all these temporary assistance programs is when the aid runs out or when tax cut runs out, the people lose their jobs again.

White House advisers are also considering permanently extending a tax credit for money invested in research and development, although some economists say that will take a long time to have an impact.

In Washington, I'm John Dimsdale for Marketplace.

About the author

As head of Marketplace’s Washington, D.C. bureau, John Dimsdale provides insightful commentary on the intersection of government and money for the entire Marketplace portfolio.

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