Obama had a lot of bad ideas in his State of the Union address. But one good one was tax credits for businesses that hire workers. This seems like the kind of smart governance we sorely need—a welcome break from the backwards thinking that tends to be the norm. Rhode Island, for example, has had such difficulty in keeping up with unemployment benefits, it has had to borrow about $127 million from the federal government. In order to avoid even more debt, however, the state is looking to raise unemployment taxes on businesses, which means even less money in the pot for hiring. In other words, state unemployment benefits could drive unemployment higher. A tax credit, however, could give businesses incentives to hire, reduce the amount they owe in taxes, and avoid higher spending.
So conservatives should be all over this one, right? Well, The Heritage Foundation isn’t. And check out this House Republican response which ignores the credit and just talks about all the other taxes Obama is cooking up. So what’s so bad about the tax credit? Well, all The Heritage Foundation says that it didn’t work because small businesses didn’t know about it. But isn’t that easy to fix? Heritage also predict that the credit will prolong unemployment because businesses will put off hiring until they can get the credit. But wait, I thought businesses wouldn’t know about it anyway? For another perspective, check out this New York Times story, which cites specific sources and a study that say the tax credit did and will work.
In truth, the tax credit is something that Republicans should at least welcome, if not embrace. How do I know this? Because Republicans already have. Back in Rhode Island, the Republican governor proposed a similar tax credit at the state level. And even Rep. Eric Cantor, the House Republican whip, praised the idea. But then he changed his mind after a ‘closed-door’ House GOP meeting.