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Generating Jobs through State Employer Tax Credits: Is there a Better Way? (Revised)

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  • Heidi Garrett-Peltier
  • Jeffrey Thompson
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    Abstract

    Revised April 13, 2010The Governors of Massachusetts, Connecticut, Rhode Island and several other states have recently proposed employer tax credits as measures to fight high unemployment in their states. Such policies are also being considered at the federal level. In the Working Paper, Jeff Thompson and Heidi Garrett-Peltier present evidence that such policies, in fact, do little to increase aggregate demand, and instead only modestly reduce the after-tax cost of labor in an economy with high unemployment, falling wages, and weak demand They suggest a more effective approach to creating jobs in the states: increasing spending in labor-intensive sectors and programs that are matched by federal funds, such as Medicaid. These expenditures would be particularly effective if they were financed through temporary high-income tax increases.

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    File URL: http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_201-250/WP219_revised.pdf
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    Bibliographic Info

    Paper provided by Political Economy Research Institute, University of Massachusetts at Amherst in its series Working Papers with number wp219_revised.

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    Date of creation: 2010
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    Handle: RePEc:uma:periwp:wp219_revised

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    Keywords: State and Local Taxation; Subsidies; and Revenue; state and Local Budget and Expenditures; State and Local Government; Health; Education; and Welfare; Business Taxes and Subsidies; Labor Demand; Wages; Compensation; and Labor Costs;

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