Jobs Bill Closer To Final Passage: Businesses Say Tax Breaks Are Welcome But They Won't Generally Lead to Hires Until Sales Improve

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Wall Street Journal

By: Gary Fields

March 5, 2010

WASHINGTON--The House of Representatives moved a $15 billion jobs bill closer to final passage Thursday, but some of the targeted businesses say the measure is underwhelming and won't likely lead them to boost hiring in a big way.

The centerpiece of the bill, a top administration priority, is a tax credit designed to encourage hiring.

 

Companies that bring on employees who have been out of work at least 60 days would not have to pay their 6.2% share of federal payroll taxes for the rest of the year. If the worker is still on the books in a year, the business owner would receive an additional $1,000 tax credit.

 

Two months after President Barack Obama first urged Congress to pass such a tax credit, small-business owners say the weak outlook for sales and widespread uncertainty over the economy and health-care are the biggest hurdles to expanding their businesses, something a tax credit can't fix.

 

Small businesses are responsible for at least 60% of hires, according to the government's Small Business Administration.

 

"People just won't hire people unless they really have a need for them," said Thomas Erb, owner of Electric Time Co., in Medfield, Mass.

 

Mr. Erb said he and his 30 employees at his tower and street clock manufacturer have been in a holding pattern for 18 months. "We're just sort of hanging out here," he said.

 

Recent economic data have been mixed.

 

The Commerce Department recently reported that single-family home sales dropped to a rate of 309,000, the lowest figure since the government began tracking the numbers in 1963.

 

Consumer confidence fell to 46.0 in February, its lowest point in 10 months, according to the Conference Board.

 

Robert Letherman, vice president of real-estate operations for Northland Corp., an Elkhart, Ind., real-estate firm, said the tax credit would be a nice enticement if he were already planning to hire, but "you cannot force the market."

 

He would like to see cuts to government spending, three years of tax cuts to businesses and stimulus money going directly to companies.

 

Mr. Letherman, who employs six, said most companies have streamlined operations during the downturn. "Adding $50,000 to the payroll for an $8,000 benefit is not worth the time to fill out the paperwork," he said.

 

A senior Obama administration official said the White House understood the proposal was not a panacea for job growth, but could provide an incentive for a business that was vacillating over whether to hire.

 

The House voted Thursday 217-201 to approve the measure, and final passage could come next week. The Senate, which passed its own version last month with bipartisan support, must do so again because the House changed some details.

 

A recent survey by the National Federation of Independent Business found 51% of small employers say slow or declining sales was their biggest problem, six percentage points higher than in a similar survey a year ago.

 

Sageworks Inc., a private-company financial-data provider in Raleigh, N.C., said sales for small businesses dropped 6.4% in 2009 from 2008.

 

"I appreciate the tax credits," said Mike Nobis, president of JK Creative Printers & Mailing in Quincy, Ill. But the key, he said, was more revenue.

 

Mr. Nobis and his 40 employees have been especially hard hit because his company's customers include banks, auto dealers and larger corporations, institutions that are "getting killed" in the current economy.

 

He said there had been "a little bit of an uptick" in the economy, driven by fresh business from customers who had held off until now.

 

Mr. Nobis's business has been owned by his family since 1970, but last year was the first time in the company's century-old history that it had a loss, even during the Depression, he said. "That was a real shock." Employees agreed to cut their work week to 32 hours from 40 hours, rather than see colleagues laid off, he said.

 

"A jobs bill to me means how do I meet my payroll today? And if I'm going to add a person how do I meet my payroll tomorrow? Tax credits don't do it," Mr. Nobis said.

 

--Corey Boles contributed to this article.

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This page contains a single entry by Ernest Roberts published on March 5, 2010 8:06 PM.

Expanded Homebuyer Tax Credit: 5 Essential Tips Local ERA Offices offer buying tips for the spring season was the previous entry in this blog.

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