Nonpartisan Analysis Projects That Nearly Two-Thirds of New Job Creation Would Come From Small Businesses
Manufacturing, Construction Among Industries That Would Get Biggest Boost
Study Adds Fresh Momentum to Tax Cut Proposal Ahead of Key Test Vote in Senate Later Today
WASHINGTON, DC—The small business tax cut proposal under consideration this week in the Senate would add nearly 1 million new jobs to the U.S. economy, according to a new, independent report released by Senate Democrats on Tuesday.
Nearly two-thirds of the net job creation—about 631,000 of the total 990,592 jobs added—would come from small businesses, according to the nonpartisan estimate. The projection adds fresh momentum to the tax cut measure ahead of a key test vote in the Senate later today.
“Creating close to one million jobs would put a meaningful dent in the unemployment problem,” said Senator Charles E. Schumer (D-NY), who chairs the Senate Democratic Policy and Communications Center. “This tax cut is not a cure-all, but it could be a difference-maker for small firms on the fence about adding payroll. After last month’s sluggish jobs numbers, we may be on the verge of a rare moment of agreement on how to help the economy.”
“This report is further evidence that a new tax cut for small businesses to hire and increase wages will provide a significant boost to the economy. Small businesses are the drivers of economic growth in Pennsylvania and across the country, and passing this tax credit will help them create good-paying, family-sustaining jobs, said Senator Bob Casey (D-PA), the Chairman of the Joint Economic Committee and a co-sponsor of the proposal.
The analysis was performed by Regional Economic Models, Inc. (REMI), an independent, Massachusetts-based firm that conducts economic modeling on behalf of public- and private-sector clients.
“Since businesses that qualify are in each state, we find job impacts in all parts of the country,” said Frederick Treyz, CEO of REMI. “Most job impacts are in services, yet all sectors are affected by the tax changes. Specifically, we see large impacts in construction as some of the provisions target capital costs and because this industry is very responsive to overall economic conditions.”
The Senate Democrats’ tax cut proposal was first proposed by President Barack Obama last year. It would give a 10-percent tax credit to businesses that add payroll in 2012, either by hiring new workers or giving raises to existing employees. Companies would be eligible for the tax break on the first $5 million of new payroll, for a maximum credit of $500,000.
A second element of the proposal would allow businesses to write off 100 percent of the value of new capital investments they make in 2012. Current law only allows businesses to write off 50 percent of these costs.
The report estimated that the proposal’s two main components would have a nearly equal job-boosting effect. The tax credit for firms that add payroll would spur 483,786 new jobs, according to the report. The bonus depreciation provision would be responsible for the addition of 497,554 jobs.
The report concludes that the proposal’s impact would be felt across a range of industries. It estimated that 93,231 new jobs would be added to the construction industry and 60,620 would be added in manufacturing.