Wednesday, October 7, 2009

Tax Credit For Employment Gains?

From the NY Times:

The idea of a tax credit for companies that create new jobs, something the federal government has not tried since the 1970s, is gaining support among economists and Washington officials grappling with the highest unemployment in a generation.


One version of the approach, to be unveiled next week by the Economic Policy Institute, a labor-oriented research organization, would give employers a two-year tax credit if they increased the size of their work force or added significant hours of work (for example, making a part-time worker full time). Employers would receive a credit worth twice the first-year payroll tax for each new hire, amounting to several thousand dollars, depending on the new worker’s salary.


[a second proposal would be] a credit in the first year ... equal to 15.3 percent of the cost of adding an employee. In the second year, it would fall to about 10.2 percent.

For example, hiring a worker might cost a small business $50,000 annually. But with the tax credit, the cost would fall to $42,350 in the first year, and then be $44,900 the next year. After that, the cost would return to $50,000.

The credit would apply only to the portion of an employee’s salary under $106,800. Lowering the cap further, however, could provide an even greater benefit to low-wage, unskilled workers.

First, if this gets passed expect anyone who argued for any government stimulus to now argue these aren't real jobs and shouldn't be counted.

Seriously -- this is a good idea and should be done ASAP.