The incoming administration has dropped one of the more objectionable tax provisions from its propsosed economic stimulus plan. The tax break, which would have given businesses a $3,000-per-job credit, was criticized for being too challenging to administer and liable to be abused by corporations. This is a good development if it frees up more funding for infrastructure investment or other policy tools that are more effective at directly accelerating economic growth. But two other provisions, one that allows businesses to deduct larger amounts of recent losses and another that permits companies to write-off asset depreciation sooner, remain in the plan. Neither of these, as the new administration's economic advisers noted in a report released over the weekend, has any direct stimulus effect; both represent costly hand-outs to businesses. The same coalition of Democratic legislators who forced the job credit out of the bill are working to lessen the impact of these cuts, particularly the increased-loss-deduction, even as senate Republicans seek to add, yes, you guessed, cuts in the capital gains tax and corporate tax rates, since those proposals are ... their solution for every problem.
-- Tim Fernholz
