It seems to me with all of the thousands of pages in tax code with no way to pay for cuts is that the Republican Congress and Senate could tie tax cuts to corporations to job growth with these businesses. This has been a large tenet of Republican campaign promises in a time most crucial to the overall party, and failing to create legislation regarding it could prove disastrous.

For instance, tie promotions, raises, and hiring to tax incentives designed to get these corporations to hire percentages of the workforce artificially and cause stimulated growth with income going out from people to further corporations in a big loop for more taxes.

Is this something that already exists, and if so, why not make it a central part of cutting taxes to meet all campaign promises while not tanking the economy?

Is my logic just flawed here or is there other nuanced pieces that I'm missing?


2 Answers 2


These programs already exist

Governments already offer the kinds of incentives you are talking about. Generally, this is in the field of economic development policy, rather that tax policy.

Tax incentive programs are incredibly common at the state level. For example, Kansas has the PEAK (Promoting Employment Across Kansas) program which provides tax incentives for business which create new, high-paying jobs in Kansas.

They are also common at the municipal level. For example, the city of Toledo (Ohio) has a tax credit program for businesses which create jobs.

The National Conference of State Legislatures has a listing of tax credits for job creation in each state.


Why This is not "a central part of cutting taxes to meet all campaign promises while not tanking the economy?"

First some things to consider given this question refers to the US. The US is has a massive debt and deficit so any tax cuts would have to be offset by getting more tax back at some point.

In the US income tax (both corporate and personal) is split into tax taken at a state level and tax at a federal level.

As the question refers to congress, this would lead to the assumption that you are suggesting this be done at a federal level.

The majority of salaries will fall into the two lowest income bands for federal tax 10% and 15% ($0 - $37950 for a single person and $0-$37900 for a married couple). There is no guarantee that creating a job will increase corporate income tax which is a small proportion of federal tax anyway, at about 9% compared to 81% income tax (40% payroll tax 41% individual income tax) (source Wikipedia). This would suggest that any significant incentive to hire could cost the tax payer more than they would recoup and more than congress or the president would wish to cut tax by.

Therefore, Given that the maximum reduction is limited by federal income tax level to about 10 or 15 % in most cases without effectively paying companies to hire people taking into account that wages are not the only cost of expanding a company they would have to consider things such as property costs, administrative costs, legal costs etc. The tax break is unlikely to represent a significant enough tax break to get companies to make a significant investment.

As you may expect that constitution has something to say about federal taxes (from Wikipedia - emphasis mine)

Article I, Section 8, Clause 1: The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.

You can probably see that implementing a tax like this uniformly across all the states would be very awkward given the states all have their own employment laws industries and way of handling things.

Some more general things to consider about giving tax deductions in this way

  • If the government wishes to invest in the economy to create jobs it has many options available including directly investing in industries of choice, starting new infrastructure projects, investing in current federal bodies or creating new ones and many other option too many for enumeration here
  • Any tax rules and or tax breaks need to be water tight. There are a number of ways to disproportionately benefit from tax breaks for hiring new staff e.g. removing some staff and hiring them back (perhaps in a pseudo restructuring if required), tweaking the terms of some staff members (e.g. contractors) so they appear to fall within bounds of the tax break. Abuse will be particularly hard to prevent in states with lax employment laws (right to work states).
  • Tax break for hiring would have to be offset by extra tax collected after expansion in companies/ the economy; There is no guarantee that the growth will be local i.e. Hire staff in the US to expand the business overseas the tax break happens in the US but the growth happens overseas and probably much of the tax growth does to. This could be to tax loss to much
  • Uncertainty, companies tend not to want to invest when there is too much uncertainly attempts at artificial growth will create uncertainty after all how long will the government subsidize growth and what will happen when it stops.
  • Any tax breaks given in this way risks stagnating growth in tax returns as you are going to not just subsidize genuinely new jobs created purely by this measure witch is likely to be a small number but also all jobs that might have been created anyway
  • Cost; this is an entirely new mechanism for giving tax breaks. It requires massive collection of information about companies size and perhaps shape , what is happening with the companies employees etc. This will be costly to administer
  • Time; a new mechanism like this could take a long time to get through congress and could face many hurdles from a technical, political and legal perspective. Then it would take time to set up, collect the required initial data and then to start actually doing. There are perhaps things that could be done more quickly and without so many hurdles to overcome

While these issues may make the whole idea seem impossible, it might work in other places that are perhaps smaller, more centralized or have a different tax system.

I realize that this answer does not really addressed any economic points. As economics is not the remit of this community and is it's own field, for a more details economic response it might be worth asking this on economics stack exchange


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