{"id":248681,"date":"2010-01-29T15:05:28","date_gmt":"2010-01-29T20:05:28","guid":{"rendered":"tag:business.theatlantic.com,2010:\/\/3.35013"},"modified":"2010-01-29T15:11:29","modified_gmt":"2010-01-29T20:11:29","slug":"how-obamas-hiring-tax-credit-could-work-and-why-it-might-not","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/248681","title":{"rendered":"How Obama’s Hiring Tax Credit Could Work — And Why It Might Not"},"content":{"rendered":"

In the State of the Union, President Obama promised to get started on a jobs bill — and fast. Well here we go: The White House has proposed taking the $30 billion of TARP money banks have repaid and give it to companies who hire in 2010. Here’s how the tax credit would work:
<\/span><\/p>\n

\u2022 Tax credits for new hires.<\/b> A small business that
\nhires ten new employees in 2010 will receive a $50,000 tax credit to
\nhelp offset the costs of those new hires. However, if the same small
\nbusiness lays off ten employees in 2010 and hires five new employees,
\nit would receive no credit. 
\n 
\n \u2022 Tax credits for pay raises.<\/b> A small business with 50
\nemployees that, through increased hours or higher pay, provides all of
\nits employees a $1,000 real wage increase in 2010 will receive a $3,100
\ntax credit, enough to cover the Social Security payroll taxes on those
\nincreases.  \n<\/p><\/blockquote>\n

Tax credits aren’t so different from the other job creating strategies
\nout there like job sharing<\/a> (where the government pays employers to cut
\nworkers’ hours to free up more work for new hires) and a payroll tax
\ncut, which is the most straightforward way to give employers money to
\nhire. One problem with job sharing and payroll tax cuts is that they
\npay employers upfront without the guarantee that they’ll actually use
\nthe cash to hire. That’s one reason some economists prefer tax credits
\nto reward hires that have actually happened.<\/p>\n

But there’s a downside: Companies could game this system a couple ways: (1) Fire Peter,
\nhire Paul, and say “Look we hired! Tax cut please.” (2) Replace one
\nfull-time worker with two part-timers (3) Divide one company into
\nmultiple companies on paper, then shuffle workers around to increase
\nthe payroll at those companies. The Obama administration anticipates all three cheats:<\/p>\n

\n \u2022 No benefits for gaming.<\/b> A small business that fires 10 workers and hires 10 workers to
\nreplace them would see no net increase in employment and thus would not receive a credit. A
\nsmall business that lays off 10 employees making $50,000 each and hires 20 employees
\nmaking $25,000 each will receive no credit. Likewise, a small investment firm that raises
\nsalaries for its top employees from $300,000 to $350,000 will not
\nreceive a credit … In addition, rules would prevent businesses from
\nrenaming themselves or merging in order to claim the credit. <\/p><\/blockquote>\n

The White House does not go into detail about how they will monitor hirings and firings and name changes.
\n<\/span>
To compare tax credits to other job creation theories, check out my pro-con rundown of the nine best way to reduce unemployment<\/a>.


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In the State of the Union, President Obama promised to get started on a jobs bill — and fast. Well here we go: The White House has proposed taking the $30 billion of TARP money banks have repaid and give it to companies who hire in 2010. Here’s how the tax credit would work: \u2022 […]<\/p>\n","protected":false},"author":1534,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-248681","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/248681","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/1534"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=248681"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/248681\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=248681"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=248681"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=248681"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}