 Tax Credits For Employment Rather Than Investment: A CommentMPRA Paper from University Library of Munich, Germany Abstract: In an article in the American Economic Review, Jonathan R. Kesselman, Samuel H. Williamson and Ernst R. Berndt presented a Table showing the effect of substituting a marginal employment tax credit (METC)for the investment tax credit (ITC) over the 1962 to 1971 period. Their METC was defined in terms of a rate times the increase in the wage bi11 over a base defined to be the previous year's value. Any base, including the previous year's wage bill base, is of course merely a proxy for what employment might be in the absence of a credit. However, needless to say, some bases are better than others. In this comment, it is argued that the previous year's level is an inappropriate way to define a base for a permanent METC that is directed at encouraging the long-run substitution of labour for capital. A better definition for a wage bill base would be something that does not ratchet up over time decreasing the value of the credit. The paper also includes a few observations on the relevance of this analysis for the 1977 U.S. Job Credit which has a base as defined by Kessleman, Williamson and Berndt, but which is an explicitly temporary measure that will only be in effect in 1977 and 1978. Keywords: tax credits; employment; fiscal policy; the 1977 Job Credit (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:26401 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.