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Jobs Creation Measure May Not Create Jobs

By John S. McClenahen The American Jobs Creation Act of 2004, passed by the Senate on Oct. 11 and now awaiting President George W. Bush's signature, may not actually do that -- except perhaps to increase the demand for attorneys and accountants to help manufacturers abide by its provisions. On the other hand, the legislation doesn't seem destined to cost the U.S. economy a lot of jobs either. Despite the impression some news stories have left, says Susan Hering, a senior economist at UBS Investment Research, the legislation doesn't contain much in new overall business tax relief. She puts it at only about $2.5 billion in fiscal year 2005, the federal government accounting year that began Oct. 1. "Moreover, the relief is spotty because it is aimed at domestic manufacturers -- as capriciously defined by Congress," she says. "Some other corporate tax relief merely reflects the renewal of existing tax breaks, such as expensing caps, which would otherwise expire soon," she adds. "The lower tax on repatriated profits -- 5.25% instead of 35% for one year -- could certainly boost after-tax profits and build corporate domestic cash. But U.S. corporations are hardly shy of either now." "By the same token, the bill is unlikely to hurt job creation much either," Hering contends. "The revenue raisers included in the legislation net out to only $600 million in fiscal 2005 -- and some of that increase reflects an extension of taxes that otherwise would have expired."

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