Sunday 24th of January 2021

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Tax Credits For Small Businesses That Hire?

If at first you don’t succeed, try, try again to get it through Congress. At least that seems to be the sentiment with President Obama’s idea to create jobs as the nation deals with a jobless rate of more than 10 percent.

His proposal for job creation features a tax credit for small businesses that add to their payrolls. He is expected to concentrate on the topic of jobs when he delivers his first State of the Union address Wednesday.

However, when the president suggested the same idea to Congress last year it went nowhere due to members’ not knowing the best method for targeting the credit. There is no trace of it in the jobs bill the House passed late last year and that is still awaiting Senate response.

The passing of time doesn’t seem to offer any solutions to the congressional dilemma. Add to that administration officials not offering details on how such a plan would work. Some tax experts wonder if it can ever be effective.

Some researchers in the nonpartisan Congressional Budget Office contend a tax credit needs to be allowed for all businesses, not just the small ones if it’s going to help create jobs. But the question remains who would administer such a program.

The researchers noted there was a similar credit allowed for small businesses in the 1970s but few used it.

There are other ideas for new job tax credits that have come up recently. Two economists suggest businesses that increase their number of employees more than 3 percent above the 2009 levels should be allowed tax credits valued at 15 percent of the amount that their payrolls increased. The credit would be restricted to only the first $50,000 of an employee’s annual pay, with the credit no higher than $7,500 per employee.

Any size company would be allowed to take the credit, which also would be allowed for existing workers earning less than $50,000 who get pay raises or additional hours to work. Employers would get the credits in the form of payments regardless if they owe taxes or not.

Separately two senators offer a plan that permits payroll tax credits to employers that hire employees who had been jobless at least 60 days. Those businesses would be exempt from paying their share of Social Security taxes on the new employees for the remainder of 2010.

The proposal is expected to save employers 6.2 percent of the employees’ pay that is subject to Social Security taxation. In turn, Social Security would be paid that same amount during the next five years from budget savings that are unspecified.