Friday, August 6, 2010
Employers eligible for tax incentives on 5.6M new hires
Sacramento Business Journal - by Kent Hoover Washington Bureau Chief
Employers appear to be taking advantage of tax incentives that Congress offered to hire previously unemployed workers.
From February through June, employers hired 5.6 million workers who had been unemployed for 60 days or longer, according to an update from the Treasury Department. Businesses that hire such workers are exempt from the employer’s 6.2 percent share of Social Security payroll taxes through the end of the year. Employers who retain these workers for a year also are eligible for a $1,000 tax credit.
The Hiring Incentives to Restore Employment Act, which was signed into law in March, gives employers “an incentive to hire new workers as soon as possible because the payroll tax exemption expires at the end of 2010,” said Alan Krueger, the Treasury Department’s chief economist.
Sen. Chuck Schumer, a Democrat from New York, said he will push Congress to extend the HIRE Act for another six months, however.
James Barba, chief executive officer of Albany Medical Center in Albany, N.Y., said the HIRE Act was a factor in his decision to end a hiring freeze at the hospital.
Albany Medical Center has hired 157 employees who meet the HIRE Act’s requirements. As a result, the hospital has saved hundreds of thousands of dollars in payroll taxes. That’s a lot of money considering the medical center’s profit margin usually is 1 percent or less, he said.
The Treasury Department’s estimates are based on monthly data from the Bureau of Labor Statistics’ Current Population Survey.
It is impossible to determine how many of these 5.6 million people who qualify for the HIRE Act incentives were hired because of these breaks. If these workers are retained through the end of the year, their employers would be eligible for $6.2 billion in payroll tax savings. That’s money businesses can use to invest in new plants and equipment, Krueger said.
Even if only a small percentage of these workers were hired because of the HIRE Act incentives, that’s still “a fairly high bang for the buck,” Krueger said.