Posted by Shyam Moondra
There are clear indications that the U.S. economic recovery is stalling. There is no danger of a double-dip recession, but the economy could use a boost from the government. Any new stimulus would have to be in the form of targeted tax incentives and not major spending programs that tend to be inefficient when it comes to creating jobs.
Given the present high budget deficit, a large-scale spending program is politically infeasible. Instead, what the Obama administration could do is to let the Bush income tax reductions for rich people (making more than $250,000 a year) expire on January 1, 2011 and use the increased tax revenues to provide targeted tax inducements to the businesses and consumers with the twin objectives of increasing employment and consumer spending. Here are a few examples of tax incentives:
· Offer temporary one-year holiday from payroll taxes to employers as an inducement to hire more people.
· Temporarily increase tax credit for new capital investments by businesses.
· Put on hold certain parts of recent financial and health care reforms that would increase the costs to the businesses, contingent upon their hiring more workers.
· Re-offer tax incentives for buying new homes and cars and making homes more energy efficient. These programs were successful the first time, so they are worth repeating again for one more year.
· Work with states to have a holiday on sales taxes for, say, six months to induce consumers to spend more, with the federal government partially reimbursing the states for the lost sales tax revenues.
· Rather than extending unemployment benefits, offer temporary jobs to the unemployed people who could work on various public projects.
