Major Flaw of the VOW to Hire Veterans Act Lost Amid Political Popularity

 
 
November 11, 2011

First of all, Happy Veterans Day.  Thank you to all of the brave men and women who have served our country.  As some servicemen/women have possibly heard, on November 10th, a bill that includes provisions to spur hiring of veterans passed the Senate by a margin of 95-0.

The VOW to Hire Heroes Act includes tax incentives intended to lower the unemployment rate of this country's veterans which, according to the Bureau of Labor Statistics, stands at 7.7 percent (860,000 workers).  Not surprisingly, the House Committee on Veterans' Affairs is already singing the act's praises (see Comprehensive Legislation to End Veteran Unemployment).

However, the VOW to Hire Heroes Act has one major problem:  The design does not prevent abuse by employers which could result in no net reduction in veteran unemployment whatsoever.

The design of the legislation is seriously flawed and the end result is therefore likely to be negligible.  As the Tax Foundation reported after the President's proposal of the American Jobs Act, tax credit programs-without proper checks put into place-given to businesses who hire unemployed workers can easily be gamed.  Unfortunately, this bill includes such credits.

These incentives include:

  • A tax credit of up to $5,600 for hiring veterans who have been looking for a job for more than six months
  • A $2,400 credit for veterans who are unemployed for more than four weeks, but less than six months
  • A tax credit of up to $9,600 for hiring veterans with service-connected disabilities who have been looking for a job for more than six months

Targeted incentives are poor policy in general, but are especially wasteful in this case.  Why?  Legislators failed to include a provision saying that business must increase net employment in order to receive the credit.  Given the lack of such a provision, a business could hire a veteran and fire one on the same day, eventually collect a government check of up to $9,600, and not reduce veteran unemployment by a single job.

Though unemployment is high (9 percent nationally, 12 percent among young veterans), politically popular legislation which has not been properly thought through is not the answer.  After serving their country, veterans should benefit from a sustainable growing economy rather than political gimmicks that will do little to serve anyone.

Follow David S. Logan on Twitter @Loganomix

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