| Log In | Register Now
By Alexandra Alper
June 16, 2011 5:13 PM EDT
It may be the only stimulus option that would get through the divided Congress, but a proposal to cut payroll taxes for employers would probably fall short of its aim of kick-starting the weak jobs market.
The latest idea to pull the country out of its economic morass has run into skepticism from economists and some business owners, even before it takes shape in Washington.
Cutting payroll taxes for employers could provide a small boost to growth. But most agree that a temporary lowering of the rate will not convince companies to hire.
"There is no silver bullet to get people hiring," said David Rhoa, owner of Lake Michigan Mailers, a document management company in Kalamazoo, Michigan.
Of course, Rhoa, like most business owners, would welcome a tax cut. But he would reinvest the savings in his firm and give some of it to his 56 employees as a small pay raise.
Follow us
"Anything that they do with that money short of burying it in the backyard should be helpful" to the economy, he said.
Without more demand from consumers, Rhoa says a payroll tax cut would not convince him to hire beyond the three new workers he already plans to add this year.
Robert Reich, a former secretary of labor and a vocal proponent of renewed heavy government spending to spur growth, says companies are "sitting on a vast cash hoard" of more than $1.9 trillion, which shows their reticence about hiring is not due to a lack of funds.
"Businesses are reluctant to spend more and create more jobs because there aren't enough consumers out there able and willing to buy what businesses have to sell," Reich, professor of public policy at the University of California-Berkeley, told Reuters in an email.
Differences over the effectiveness of cutting taxes to boost jobs are not new.
A tax credit under former President Jimmy Carter to stimulate new hiring in 1977-78 has been lauded by some economists. John Bishop, an associate professor of human resource studies at Cornell University, said it preceded a jump of more than 10 percent in private employment.
But critics say the impact was short-lived and highly expensive to taxpayers.
OBAMA POINTS TO SUCCESS OF 2010 TAX CUT
President Barack Obama on Monday praised a payroll tax holiday introduced earlier this year for employees -- but not for employers -- as helping the economy. The White House has said it is open to ideas about new measures.
We value your privacy. Your email address will not be shared.
