Hillary Clinton is devoting a plank in her economic platform to a tax credit idea that even some members of her own party and its allies have questioned.
The $1,500 tax credit for companies that train and hire apprentices that Clinton touted Monday in her first major speech on economic policy recalls efforts by previous Democratic presidents to create incentives for employers to hire—efforts that have drawn criticism from some Democratic lawmakers and liberal economists who say the tax credits don't provide the jobs they are designed to deliver.
"Workers are assets," Clinton said at New York’s New School, where she detailed her economic platform in her campaign for the Democratic U.S. presidential nomination. “Investing in them pays off. Higher wages pay off. Training pays off. To help more companies do that, I proposed a $1,500 tax credit for every worker they train and hire.” She first announced the apprentice proposal in June at Trident Technical College in North Charleston, South Carolina.
Tax credits for hiring aren’t new. The Congressional Research Service, in a 2013 report, noted that the "targeted jobs credit" created during President Jimmy Carter’s administration in the 1970s, was criticized as handing money over to companies that would have hired the workers anyway. Clinton’s proposal is narrower than its predecessor programs and has an additional goal: encouraging employers to shoulder the time and cost of training unskilled workers.
But President Barack Obama was also mindful of stumbles in the past when he brought the tax credit-for-hiring idea back to the forefront in his 2009 stimulus package, by expanding the 1996 Work Opportunity Tax Credit (created by President Bill Clinton) . He made it harder to claim the credit and looked for ways to minimize rewarding companies that would hire workers without it. Still, over the years, it has morphed into something more closely resembling Carter’s program, according to the non-partisan CRS.
At its post-stimulus peak in 2011, 1.2 million certifications were issued to employers for hires eligible for the credit, according to the U.S. Labor Department, which doesn’t track the number of people actually hired and retained with the credit. That program applied to workers including low-income people, disabled veterans and ex-felons, such as the non-violent drug offenders whose sentences Obama commuted on Monday. They must remain in their jobs for a minimum amount of time for their employer to claim the credit.
The credit costs more than $1 billion annually, mostly in the form of tax revenue lost to the U.S. Treasury., according to the Washington-based Center for Law and Social Policy, which promotes policies to help low-income people.The group, in a 2011 report said the credits haven’t created new jobs, improved unemployment numbers or had much of an effect on hiring people who wouldn’t have otherwise gotten jobs. It called the credit “a well-intentioned program that has little, if any, effect on its desired outcomes. These funds should be redirected to a more targeted program that has the potential to have a significant impact.”
The credit expired in 2014 and was extended as part of the tax extenders package in December, meaning it was in effect for all of last year. It could be retroactively extended again.
Another hiring tax credit from the same era exempted companies from contributing to the Social Security program if they hired longtime-unemployed workers. Senators Charles Schumer, a New York Democrat, and Orrin Hatch, a Utah Republican, authored legislation that gave businesses an exemption from Social Security payroll taxes for workers hired in 2010 who had been unemployed for at least 60 days. But Representative John Conyers, a Michigan Democrat who supports raising the minimum wage and other policies to boost low-income workers, called the Schumer-Hatch hiring tax credit “bad policy” and “a meaningless giveaway to corporate America.” The left-leaning Economic Policy Institute said it would create "few jobs at excessively high cost." The credit has since expired.