Our Human Resources Blog

                      This past week the Senate passed a bill offering tax breaks to companies that hire unemployed workers. The bill is aimed at providing private businesses with an incentive to hire some of the millions of Americans who have lost jobs during the recession. It's unclear, though, how small firms will benefit from this bill?

The bill contains two items of interest to small businesses. The first is a hiring tax credit that would waive the employer's share of Social Security payroll taxes (6.2%), for the remainder of this year, when they hire a worker who has been out of a job for at least 60 days. The tax exemption would be prorated for the year, depending on when the person was hired. The sooner someone is hired, the more the employer would save in taxes.  There is no cap on the plan, so theoretically a company could hire multiple workers and get the tax break for each of them.  In addition, the bill would provide a $1,000 income tax credit for every new employee retained for at least 52 weeks. Secondly, the bill would allow businesses to write off up to $250,000 in capital investments in 2010, rather than depreciating the costs over time.

While I'm sure most can appreciate the fact that this is a well intentioned proposal aimed at getting people back to work, I am left wondering if the Senators included any small business owners in their discussions?  I have a feeling they didn't, as I don't know any business that would hire an employee solely for the tax break. Most companies hire employees because they have work to do.  I may be missing something, but who would want to hire a $25,000 employee to get a $1,550 reduction in FICA or a $1,000 tax credit?

While I agree that if a company is already considering hiring someone and are sitting on the fence, the tax break may help in their decision.  In reality though, it seems to me that the result of this bill will be to give away federal tax money to companies that were already going to hire people in the first place?   Surely there has to be a better way to promote job growth?