Hope and Fail

Forget that $3,000 tax credit UPDATE: Jobs bill includes limited credit

While the stimulus package spends nearly $800 billion, left out was President Obama’s promise of a tax credit for businesses that hire new workers.

The president’s transition Web site says this:

Obama and Biden will provide a new temporary tax credit to companies that add jobs here in the United States. During 2009 and 2010, existing businesses will receive a $3,000 refundable tax credit for each additional full-time employee hired. For example, if a company that currently has 10 U.S. employees increases its domestic full time employment to 20 employees, this company would get a $30,000 tax credit — enough to offset the entire added payroll tax costs to the company for the first $50,000 of income for the new employees. The tax credit will benefit all companies creating net new jobs, even those struggling to make a profit.

In October 2008, Obama told a crowd in Ohio:

We’ve already lost three-quarters of a million jobs this year, and some experts say that unemployment may rise to 8% by the end of next year. We can’t wait until then to start creating new jobs. That’s why I’m proposing to give our businesses a new American jobs tax credit for each new employee they hire here in the United States over the next two years.

If the tax credit were going to happen, the Recovery Act is the avenue to take. But the president’s proposal was pulled from the Recovery Act by the House Appropriations Committee, and it doesn’t seem to be going anywhere — Congress doesn’t like it.

Sen. Chuck Schumer, D-N.Y., said in January, “If you have a company and you’re selling fewer shingles, $3,000 isn’t going to get you to hire somebody when your sales are shrinking.”

Update

President Obama signed the HIRE Act on March 18, 2010 — which includes a tax credit for businesses that hire new workers. Small businesses get a break from paying their share of a new worker’s Social Security tax (6.2 percent of wages). Additionally, the act would give businesses an additional $1,000 credit for employees who remain on the job for more than a year.

However, the tax credit only applies to 2010 (since 2009 had come and gone), so the two-year window Obama promised is out. What’s more, for businesses to get real money from the act, workers have to be well-paid. From an analysis by Arnstein & Lehr:

The new law exempts any private-sector employer that hires a worker who had been unemployed for at least 60 days from having to pay the employer’s 6.2% share of the Social Security payroll tax on that employee for the remainder of 2010. A company could save a maximum of $6,621 if it hired an unemployed worker and paid that worker at least $106,800—the maximum amount of wages subject to Social Security taxes—by the end of the year.

Save/Share: