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Lack of Credit Where Credit Isn't Due

by on January 24, 2011

Who wants tax rebates? And who wants beer and cotton candy for breakfast? My initial impulse is to answer “Yes” and “Yes,” respectively, as this is seemingly one case where I absolutely want to align myself in the common area of the Venn diagram.

But the aftermath of indulging in either option presents long-term downsides despite the initial euphoric buzz. The fiscal equivalent of rotted teeth and an afternoon hangover is a policy that’s currently fashionable in Albany. Specifically, the plan is to offer a tax break that by design comes too late:

New York Senate Republicans approved business-tax cuts and limits on levies that go beyond proposals by Governor Andrew Cuomo, who took office this month.

The Senate’s three-part plan provides tax credits for hiring, a 2 percent state spending cap and a requirement that tax or fee increases receive a two-thirds vote in both chambers of the Legislature, rather than a simple majority. The measures must also pass the Assembly, where Democrats hold a majority and haven’t endorsed the proposals.

Capping spending is naturally a commendable idea, especially in a state whose approach to citizens’ money is usually the equivalent of driving it like they stole it. Advocates of economic and personal freedom also approve of any initiative that requires a higher percentage of elected idiots to go along with any plan to raise taxes.

But the credits amount to sugar pills that certainly don’t address the symptoms. It’s not like we have handouts to spare:

New York faces a budget deficit of about $10 billion in the year beginning April 1. Cuomo’s budget for that year is due by Feb. 1. The current year’s budget, which Comptroller Thomas DiNapoli said may have a deficit as large as $1 billion, is $135.3 billion.

Cuomo’s “Plan for Action,” published during his election campaign, supported a $3,000 tax credit for hiring unemployed workers, which Republicans would supplement with an additional $5,000 credit over three years for any new hiring.

At least the conversation’s focus has changed. As recently as a few years ago, a Cuomo Plan for Action would have detailed why keeping half of what you make was selfish. Thankfully, today’s lawmakers instead bicker over which taxes are most despicable:

Cuomo also advocated a freeze in state taxes, while Republicans propose to eliminate the higher personal income-tax rates for owners of small businesses, rather than waiting for the higher levy to expire at the end of 2011. The Republicans would also eliminate the corporate franchise tax over a two-year period for businesses with 50 employees or fewer and no more than $2 million of profit, which wasn’t part of Cuomo’s published agenda.

The surprising conversational topic amongst Empire State politicians is another promising sign that both parties are at least still pretending to work for voters instead of plundering from them. But giving a bonus to employers for bringing aboard new staff is pointless if there’s nothing for the new hires to do.

New York would be throwing gasoline upon an extinguished fire. Such a tactic would be as ineffective as, say, letting Washington spend 12 or 13 figures of taxed or borrowed funds to improve the economy. Unemployment will dip below eight percent any decade now.

Jobs aren’t created as a result of government bribes: they’re a natural byproduct of an atmosphere that’s conducive to economic growth. To establish such a financial haven, our politicians ought to be doing next to nothing.

The state’s job is to encourage growth by removing itself from the equation, not play an active role by doling out commercial welfare. The jobs will come only after our default leaders stop thinking that they can successfully prompt employers into staffing action.

Getting out of the way is the only tactic that helps. It’s far easier for the government to manufacture opportunities by removing barriers, especially in contrast to issuing hollow incentives in the hopes payrolls will grow despite economic anemia.

And the money comes from somewhere. Paying companies that don’t have a reason to hire workers to hire workers is why they’re not hiring workers in the first place.

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