Underscoring the failure of the almost $1 trillion in stimulus spending are the loss of 95,000 jobs and the 9.6 percent unemployment rate (15.4 percent for unskilled adults). It should be no surprise that employers aren’t hiring. Congress has left town and employers don’t even know what their tax rate is going to be next January. If they file as a small business, will their tax rates be 10 percent or 15 percent at the low end? Will rates be 35 percent or 39.6 percent at the high end?
If they’re corporations, will taxes on dividends be 15 percent, or will dividends be taxed at ordinary income levels? Will the long-term capital gains tax rate be 15 percent, 20 percent, or 25 percent? Will businesses get expensing and a permanent research and experimentation credit?
No one knows, so businesses can’t plan and hire.
Plus, businesses are being crushed by government mandates that are structured to discourage hiring, especially of low-skill workers. For instance, if they have more than 50 workers, they’re preparing for new annual penalties of $2,000 per worker in 2014 if they don’t offer the right kind of health insurance.
If they have fewer than 50 workers, they won’t want to hire more than 50, and if they have 55 to 60 workers, they’re probably thinking about how to contract out some services or shed labor to get to the magic 50 number. And starting from 2011, all businesses will have to file 1099 forms with the IRS if they buy more than $600 from one supplier, paperwork that will take time and money away from running their companies.
Examiner columnist Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.
