This week, I've been considering the value of tax cuts as an effective economic stimulus. On the one hand, government spending appears to provide the most bang-for-the-buck. That is: for every dollar deployed by the government, the resulting economic boost is greater when the government spends money rather than when it cuts taxes.

On the other hand, however, there are only so many projects and programs that the government can fund that would put money into the economy quickly enough, so some tax cuts make sense. At a reported 40 percent, Paul Krugman thinks this proportion of tax cuts in the Obama plan is too high.

Now, Howard Gleckman at the Tax Policy Center blog TaxVox throws water on the business tax cuts of the Obama plan:

The net operating loss idea makes some sense. But other than trying to buy votes from pro-business Capitol Hill Republicans, it is hard to see what the other two schemes would accomplish. Bonus depreciation in its many incarnations has been tried a half-dozen times over the past four decades and its benefits are, shall we say, hard to find. It won't help companies with losses (most of them, these days), or non-profits. A year ago, while both were at The Brookings Institution and TPC, Obama advisor Jason Furman and CBO director-designate Doug Elmendorf wrote of the 2001-2003 versions, "bonus depreciation for business investment did not seem to be very effective in spurring economic activity."

Especially pointed are Gleckman's comments on the hiring incentives for businesses. I haven't seen enough of this criticism, because this kind of tax cut really is just a giveaway.

Refundable tax credits for hiring new workers promise to be an administrative nightmare and won't create many new jobs. It is tough to see how a company that is seeing its sales slaughtered in today's recession is going to hire just because it gets a few thousand dollars per new worker from the government. Profitable firms would merely take the credit for bringing on workers they were already planning on hiring.

Image by Flickr user jenlen used under a Creative Commons license.