Tax cuts for jobs
Robb Mandelbaum offers some details on the administration's tax credit for new hiring:
A firm that hires a new employee in 2010 would get up to a $5,000 credit against its income tax. Alternatively, a company that hands out raises above the inflation rate in 2010 would get an income tax credit equal to the additional Social Security taxes it would pay on the increase. Although effectively similar to a payroll tax holiday for an employer, as an income tax credit, the raise incentive would not actually reduce payments to the Social Security trust fund.
The tax credit would be available to employers on a quarterly basis, which, the White House says, would encourage early hiring. It would also be retroactive to the start of the year. And while any business could claim the credits, they would be capped at $500,000 for each business. The administration estimates that one million businesses will take advantage of the credit.
The program is expected to cost $33 billion, and it'll be funded with TARP money. The basic idea here is to accelerate the job market. You won't create "new" jobs with a $5,000 tax credit, but you might convince a company that was going to hire in 2011 to make that investment in 2010 instead. That's good for workers, and not coincidentally, good for the administration, which would like recovery to come as fast and as soon as possible, preferably before the midterm elections. For more on the program, you can download this fact sheet (pdf).
February 1, 2010; 12:59 PM ET
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