Senators Charles E. Schumer (D-NY) and Orrin G. Hatch (R-UT) have published an op-ed in the New York Times, A Payroll Tax Break for Jobs:

With the national unemployment rate at 10%, and more than 15 million Americans looking for work, ideas to spur job creation are at the forefront of everyone’s minds. While we may represent different political philosophies, we recognize that high unemployment — particularly long-term unemployment — is not a liberal problem or a conservative problem; it’s a national problem that takes a huge toll on families.

The idea for some sort of jobs tax credit is percolating again, but the jobs credit that existed in the late 1970s was of limited success, and it was excruciatingly complicated. Recalling this experience, members of Congress from both parties have been lukewarm to such a credit, and the idea was dropped from the stimulus package last year.

We have an idea that is simple, straightforward and easy to explain and administer. In fact, it is so simple that the legislative text of the proposal is only a few pages long — a rarity when it comes to tax policy.

Here’s the idea: Starting immediately after enactment, any private-sector employer that hires a worker who had been unemployed for at least 60 days will not have to pay its 6.2% Social Security payroll tax on that employee for the duration of 2010. The Social Security trust fund will then be made whole with spending cuts elsewhere in the budget between now and 2015. That’s it. Simple to understand, and easy to explain.

The proposal has drawn considerable fire:

• Martin A. Sullivan (Tax Analysts) disagrees in Sorry, Payroll Tax Break Proposal is a Loser:

Unfortunately, the simplicity of the Schumer-Hatch plan leaves it wide open to unacceptable abuses. Fixing these problems will pretty much put us back into the same can worms we get into with jobs credits.

What's the problem? In brief, under the Schumer-Hatch plan employers could get tax credits for firing current employees and hiring the unemployed. This would most likely occur in low-wage jobs where employers do not highly value the job skills of existing employees. Another separate problem is that under the plan employers would receive generous tax credits for normal turnover of their workforce even when they are not increasing or even reducing the size of their workforce. Yet another problem is that officially unemployed would be favored over other prospective hires–like youths entering the workforce and parents returning to the workforce.

The way to fix these problems with the Schumer-Hatch plan is to add a requirement that we only give the tax relief to employers that are expanding employment. But then we go full circle and are back to the basic structure of the jobs credit they do not like.

• Future of Capitalism, Perverse Incentives:

Like many efforts to use the tax code to fine-tune the behavior of firms or individuals rather than to efficiently and fairly raise the revenue required for government, however, this idea has problems that Mr. Schumer and Mr. Hatch don't confront in their article. What's to stop a business from firing its employees now and then re-hiring them two months later to take advantage of the tax benefit? If you are an employer interviewing a promising job applicant who has been unemployed for 30 days, are you going to tell that person to start work tomorrow, or wait a month so that you can take advantage of the tax benefits? If you were fired yesterday, are you going to start looking for work today, or wait 45 days until you are more appealing to a potential employer who knows about the tax benefit? The effect of the Schumer-Hatch proposal might be to retard job growth rather than to spur it.

(Hat Tip: Ted Seto.)