Job creation is one of the most important components to economic recovery. On this, liberals and conservatives are sharply divided. While liberals believe in spending their way out of problems, conservatives try to take a more pragmatic approach. In February of 2009, President Barack Obama and his Congressional allies passed a trillion-dollar spending package that only resulted in increased unemployment, because it did not address the core problem. To reduce unemployment, Congress must stop job losses. Only then can government remove the barriers that prevent firms from investing and taking risks.
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- Provide Tax Relief for Working Families and Small Businesses: Reducing the lowest individual tax rates from 15 percent to 10 percent and from 10 percent to five percent could help a married couple filing jointly save up to $3,400 a year in taxes. By reducing taxes for families and allowing small businesses to take tax deductions equal to 20 percent of their income, Congress would send a clear signal that it intends to shift its focus from spending to tax relief. This kind of relief encourages investment, risk-taking and recovery and also allows small businesses to re-hire former employees and/or create new jobs.
- Extend the Bush Tax Cuts: Private-sector job creation has fallen sharply because of less investment and less entrepreneurship. Although companies have hoarded trillions in savings since the end of the first-dip of the recession, they are reticent to part with these profits until a decision is made about the Bush Tax Cuts. If Congress allows them to expire at the end of 2010, expect businesses to use these savings to off-set a tax hike. If they're retained, the result could be a huge deluge in private sector corporate spending -- just the thing for a struggling economy.
- Assist the Unemployed: One of the most important components of any job growth plan is the way in which unemployed workers are moved back into the workforce. The first step is to make unemployment benefits tax free, so that unemployed workers can concentrate on looking for work, rather than worrying about how to feed their families. Another step is to streamline the job search process by eliminating mandatory unemployment programs. While these programs are important resources for certain unemployed workers, they hinder others, whose time might be better spent searching for work for which they are already qualified.
- Limit Union Powers: Labor and trade unions have tremendous power in the American workforce, and while they do serve a vital role in protecting American workers, companies often find their demands to be too unrelenting and end up shipping jobs overseas. Congress needs to strike a balance between employer freedoms and the basic worker protections that unions were originally intended to secure (such as employee benefits, workplace safety and workweek hours). As long as unions continue to diminish the power of small businesses and corporations to regulate their own workforce, American jobs will continue to be scarce.
- Establish a Job Growth Incentive Tax Credit: A tax credit of this kind rewards businesses who are undertaking job creation projects that result in additional jobs. Colorado, long resistant to such changes, offered this experimental incentive to businesses in its state on Aug. 4, 2009. The program calls for a $500 to $2,000 deduction per newly created job (depending on the tax bracket the newly created position falls into). There is good reason to believe that a similar incentive might spur nationwide job growth if it were adopted at the federal level.
- Expand Net Operating Losses (NOLs): In March, the IRS announced that small businesses whose deductions exceeded their income can use a Net Operating Loss (NOL) tax provision to get a refund of taxes paid in prior years. Conservatives would like to see this so-called "carryback rule" expanded from two to five years. This would enable many formerly profitable companies the chance to recoup refunds from previous taxes paid, giving them a fresh infusion of cash to make new investments, rehire former employees and/or create new positions.
- Allow Bonus Depreciation/Small Business Expenses: The 2008 economic stimulus package included favorable depreciation rules that gave businesses both large and small enhanced incentives to make investments that were previously unrealistic thanks to the economic slowdown. Conservatives want to see these depreciation and expense rules permanently adopted rather than merely extended for an additional year, as outlined in the Democrats' 2009 economic stimulus package.
- Repeal the Three Percent Withholding Requirement for Government Contractors: In 2012 a new law will require federal, state, and local governments to withhold three percent from all payments for goods and services as a guard against possible business tax evasion. This withholding applies to the total contract, not the profits generated from a project, which means contractors are not being reimbursed for material and supply costs. Repealing this withholding would allow these contractors room to grow and add jobs, while also providing support to suppliers and ancillary businesses that also depend on this revenue.
- Permit Health Insurance Deductions:Permitting this kind of deduction would allow shareholding employees of a small company, who are not receiving tax-preferred, employer-sponsored coverage and who often struggle to afford health insurance, the opportunity to claim above-the-line deductions, saving up to $1,250 a year in federal taxes for each employee. Since larger corporations make these deductions, smaller corporations should have the same option. With other job growth incentives for small businesses, this is one more area of savings that can help a small business expand and provide future job opportunities.
- Do Not Raise the Minimum Wage: Although raising the prevailing minimum wage is high on the liberal "to-do" list, even discussion of such proposals before the end of a recession kills jobs. When large corporations and small businesses hear that the minimum wage they pay their employees may have to increase at a time when overall profits are down, executives may decide to cut jobs just to get ahead of the curve. The first rule in job growth is cut job losses, and announcing plans to raise the minimum wage -- or actually raising it -- violates this rule.