Correction: the action is at the margin
Barbara Kiviat at Time writes about the jobs bill Harry Reid is trying to pass: The bill would temporarily exempt employers from paying Social Security payroll taxes for new hires, and give a $1,000 tax credit for new workers kept at least a year. This type of move isn't really about creating jobs, but about accelerating those that would have been created anyway. (I've yet to find a businessperson yet who has said he or she would create a job out of thin air just to grab a tax break.) Not right. The point of tax breaks is to move the margin. Indeed, nobody will create a whole job just to get a $1000 tax break (let's say $3000 including the payroll taxes). But the case that matters is where the employer's gain from employing someone would have been $29,000 and the cost $30,000. A net loss, meaning no job. The subsidy changes the equation; the cost goes down to $27,000 - and suddenly it's worthwhile for the hire to take place. What's more, the government wil...