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Tax Credits for Hires Could Spur Director-Level Jobs

Estimated job creation from tax credits by think tank the Economic Policy Institute.

Estimated job creation from tax credits by think tank the Economic Policy Institute.

The Economic Policy Institute, a nonprofit economic think tank focused on policies for low- and middle-income workers, recommended Congress enact a payroll tax credit for new job creation that it says will create more than 5 million jobs over the next two years.

Under the EPI proposal, companies would be eligible for a refund of 15 percent on new payroll taxes created in 2010 and a 10 percent refund on new payroll taxes created in 2011. In other words, “firms could receive the credit for adding new jobs, adding hours for existing workers, or simply raising pay,” the EPI said in a prepared statement.

To encourage job creation, not just raises, the credit is based only on that portion of payroll subject to social-security taxes, ($106,800 in 2009). Executive jobs created in 2010 and 2011 would be eligible up to that limit, but raises to individuals already earning more than $106,800 would be precluded.

These recommendations are being considered by lawmakers and the Obama administration and support is building, said The New York Times. A tax credit for hiring does have some precedence, said Raghav Singh, a staffing partner at The A-List.

In 1977 to 1978 the federal government created the New Jobs Tax Credit — a wage subsidy equal to $7,000 for each additional worker hired. The program is estimated to have added about 2.1 million new jobs, at a cost of about $20,000 per job (in 2008 dollars). Compare that with the estimated $92,000 per job created under the current stimulus package and one has to wonder why this wasn’t started earlier.

President Obama had proposed tax credits for hiring on the campaign trail in 2008 and tried to introduce tax credits for hiring into the Federal stimulus bill, but it was opposed by many members of Congress and was left out of the final bill,  according to reports in the NY Times and The Wall Street Journal.

(Image by Economic Policy Institute)

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