Keep it simple | Reward small businesses for hiring as a way to turn tax burdens into taxpayers
As I write this, the U.S. Commerce Department is announcing that 36,000 jobs were created during the month of January. Of course, any added job is good news. Still, the creation of 36,000 jobs in a nation of more than 300 million people is microscopically minimal. Especially when you consider that 1.4 million people have been out of work long enough to exhaust their unemployment benefits.
The lack of jobs is a big issue here in Maine as well as across the country, and has been for the last couple of years. Unfortunately, many folks still look for their political leaders to fix the problem. All you had to do was watch the lead-in to the State of the Union address to realize how unlikely that is. For days leading up to the president’s speech, the primary discussion was whether Democrats and Republicans would shake it up and sit next to each other. Then the discussion turned to whether they would sit on the Democratic side or the Republican side. Apparently this would signal to all of us who had the real power. Please! This reminded me of my first-grade class when the teacher made the boys choose seats next to the girls. At that age, we were deathly afraid of catching cooties. Luckily, I outgrew that fear and by fourth grade I couldn’t wait to catch cooties.
Then there was the State of the Union speech itself, where the president, like all presidents before him, laid out all the wonderful accomplishments planned for the coming year. I’ll be honest — I ignore these speeches. I find it difficult to place credence in future promises when no effort is made to look back and explain why all those things that were promised 12 months ago didn’t work out. Could you imagine a scenario like this existing in private business? Your business colleagues would never accept your 2011 puffery knowing that you didn’t accomplish much of what you set out to do in 2010. The best you could hope for would be to become one of the 36,000 people who just found a new job.
A new incentive
Government cannot create the jobs needed to get our country or our state moving. The only jobs government can create are government jobs, something that, unfortunately, federal and state governments have become quite good at. It reminds me of a movie of my youth, “The Blob.” Some of you may recall that the Blob rolled over things and gobbled them up, getting bigger and bigger and eventually eating Tokyo and a few other places. I find the growth of government just as scary. A recent report indicated that more than 200,000 federal jobs have been created over the last 18 months. Since taxation is the only way our government raises money, we need to be on the lookout. The Blob is rolling our way.
The only way we’re going to get our economy on track is for our small businesses to start hiring. It is small business that creates the bulk of non-government jobs and handles a big chunk of the tax burden. But it takes more than the recent presidential admonishment that businesses “need to get in the game.” We need to find a way to instill confidence in the private sector. One of the quickest and most effective ways would be to introduce sizeable tax incentives for every person that Maine businesses add to their payroll. Basically, let’s turn tax burdens into taxpayers.
I fully admit that I am not a deep thinker in terms of economics. Still, my very basic math suggests that if you gave businesses a $5,000 tax break for every new person hired, the resulting elimination of unemployment benefits plus the payroll taxes generated by a newly minted job would more than offset the $5,000. We should also remember that the new job’s payroll taxes are paid by both the employer and the employee. If we created more meaningful jobs, or any jobs for that matter, wouldn’t that result in more taffy sold in York or more cars sold in Saco or more lobster rolls sold in Wiscasset?
I know what you’re thinking. The hiring incentive is way too simple of an idea. All you have to do is look at the IRS tax code to know that simplicity doesn’t sell. I just wish that we had some government leaders (leader: a word I use with cynicism) who had the foresight to give to small business instead of the currently accepted take from small business.
If you have a better idea, I hope you’ll let somebody know. I suggest you keep your idea simple; anything too complicated will require study by a government task force which will then create a new state agency and likely result in … “The Blob ate Vacationland.”
Stephen Vlachos, principal at Caswell Vlachos Group LLC, a business brokerage firm in Portland, is a serial entrepreneur and business consultant. He can be reached at svlachos@caswellvlachos.com. Read more On Your Own here.
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