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Modest incentives

Sen. Harry Reid, D-Nev., announced Monday the Senate will take up a bill offering tax breaks to small businesses that hire workers or invest in new equipment.

The bill combines initiatives sought by President Obama, who said in January they would spur small business start-ups and entrepreneurs.

“This is the kind of legislation that there should not be a fight,” said Sen. Reid, the majority leader. “This is a place where Democrats and Republicans should be able to find common ground.”

The measure would provide small companies with a 10 percent tax credit of up to $500,000 on payroll added this year through new hiring. The proposal also would extend a 100 percent write-off on equipment that is placed in service this year, rather than having owners spread depreciation over multiple years.

The Democratic package could reduce anticipated federal tax revenues by about $25 billion.

Carping that these proposals come only on the eve of next fall’s elections is irrelevant. Give the proposals a try. If they help small businesses, give the Democrats credit, by all means.

That said, both parties continue to fall into the trap of deploying carrots and sticks likely to sway only those with laughably short attention spans.

If you want a horse to win a race, you make sure he gets proper nutrition and exercise. You pay attention to his health. You free him from distractions and from carrying excess weight. You don’t pretend to teach him how to run. Putting a new little carrot on the ground in order to coach a spooked horse into taking each step is a mighty slow approach.

Businesses, even small businesses, are doomed if they’re dumb enough to incur added long-term liabilities — hiring workers they don’t need, say — to gain a short-term tax advantage that’ll expire come December. More to the point, businessmen and businesswomen with any survival instincts will ignore such modest incentives when they hear the roar of an approaching tidal wave.

Has everyone forgotten that, in a mere nine months, all manner of temporary tax breaks will expire, slamming all Americans — including business owners — with higher income taxes, higher death taxes, higher taxes on capital gains and interest? The list goes on and on.

Meantime, Mr. Obama’s department heads rarely agree to not impose onerous and costly new regulations; their standard pattern has been to agree to postpone the attachment of these crippling new manacles till shortly after the president’s assumed re-election.

What American businesses need is some assurance that a predictable environment of reasonable regulation and lower taxes will prevail, not for nine months, but for five or 10 years into the future.

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