Tax Analysts Blog

Veterans Job Credit is Feel-Good Tax Policy -- and a Distraction

Posted on Nov 8, 2011

The Senate is poised this week for another exercise in strictly symbolic politics.The VOW to Hire Heroes Act -- a pair of job creation tax incentives extracted from the ruins of President Obama's failed stimulus measure -- seems likely to get a vote in the next few days. Let's hope it passes, so we can get on with more serious policymaking.

Let's be clear: I am fully enthusiastic about the goals and intentions of this bill. Veterans are underappreciated and deeply deserving. Veterans' groups have made this point repeatedly, and they are right.

But this sort of feel-good legislation is a distraction from more serious policymaking. By their very nature, job creation incentives are of dubious utility. Some seem to make a difference, at least on the margin. Others not so much. But rarely have they delivered as hoped (and advertised). As the Congressional Research Service concluded last year, "incremental tax credits have the potential of increasing employment, but in practice may not be as effective in increasing employment as desired." Not exactly a rave.

These kinds of tax incentives fall into the "something is better than nothing" category of public policy. But despite their laudable intentions, they are doubly pernicious. First, they encourage the creation of still more incentives, each with a fine goal but none with a unique claim to national attention. Almost by definition, every incentive is defensible and desirable when judged in isolation. But taken as a group, they are a blight on the tax system -- which is a civic asset that every American should strive to protect.

Second, and more important, these feel good incentives are a distraction from the serious work that Congress needs to get done. We've got real problems in this country, not the least of which is mass unemployment. The nation as a whole, including its veterans, would be better off if lawmakers stopped cherry picking the feel good elements of tax policy and actually tried to do something about the economy.

Like passing a real stimulus bill.

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