Monday, October 13, 2008

Can You Spare $3000 for a Job?

Is this an economic incentive? If you create a job you will get a $3000 tax credit. Wow! This new plan unveiled by Mr. Obama makes little economic sense to me. First, does he realize how much it actually costs to create a job for a business? A business must look at both its fixed and variable costs when creating a job. What is the hourly salary along with the social security taxes and whatever benefits it pays will be the actual cost of the job, for example $22 a hour wage plus another $8 in taxes and benefits equals $30 a hour cost. Multiply it by 40 hours a week and you have $1200 a week or $62,400 for the year. If you subtract this tax credit it will cost the business $59,400 a year for this new job creation. The business must earn an additional $59,400 in sales/profit to even begin to justify this new job. If the costs of creating the job outweigh the benefits to the business then the job will not be created. You really do not need to be an economist to figure that out.
Thus in the simple world of Presidential politics, Mr. Obama yet again shows his ignorance of the business world and the economy of the United States. Why would you as a business person risk $62,400 to get $3000 back as a tax credit? I just love the fantasy world that the US Congress lives in. This is not an economic incentive in any way, shape or form. Just another lie by the supposed Economist Obama.

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