$5,000 tax credit for each new job a big part of Obama's plan

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By: Richard Wolf

January 29, 2010


WASHINGTON -- President Obama will promote tax cuts for small businesses Friday as he continues his renewed focus on job creation, but some of the nation's job creators are dubious.

One sentence from his State of the Union address Wednesday night will become the focus of his visit to Baltimore: a $5,000 tax credit for each job created on a net basis in 2010, up to $500,000 per company.


The idea is to prod companies to hire more workers. Small companies also can raise wages or hours and be reimbursed for the Social Security payroll taxes. Either way, the White House says, tax cuts for small business should lower the cost of hiring workers.


There's only one problem: Business groups say the credit won't do much to boost hiring.


"I really don't think it's going to be much of an incentive," says Bill Rys, tax counsel for the National Federation of Independent Business. "Mostly it is going to be used by businesses that would have been hiring anyway."


The National Association of Manufacturers is promoting its own job-creation package, featuring a cut in corporate income tax rates and a more generous tax credit for research and development. The group considers those changes more important than the $5,000 tax credit.


"For those manufacturers who are looking to hire, this will help," says spokeswoman Erin Streeter. "We don't anticipate this tax credit being a reason for them to hire. Our members are going to hire if there is a long-term need."


The White House pushed the proposal Thursday as an improved version of a $3,000 tax credit Obama promoted during his 2008 presidential campaign. It said more than 1 million small businesses would benefit if the one-year plan is enacted by Congress, at an estimated cost of $33 billion. The funds would come from the Troubled Asset Relief Program, which was enacted in 2008 to bail out banks and other financial institutions but has billions of dollars left over.


Start-up companies would be eligible for half of the credit. Non-profits would be eligible for the full credit, but state and local governments would not.


Obama's original proposal languished in Congress last year. Democrats as well as Republicans said it could be subject to fraud. At the time, the economy was shedding hundreds of thousands of jobs each month, and a small tax credit appeared to be no help.


Now the White House says the plan is timed for a period when many businesses may be on the verge of hiring, and a tax credit could help. It also says steps have been taken to guard against fraud. For instance, a company could not claim the credit by replacing higher-paid workers with more who earn lower salaries.


For Obama, the tax credit is one part of his effort to focus year two of his presidency on job creation. On Thursday, he and Vice President Biden were in Tampa to promote $8 billion in grants for high-speed rail projects, funded under last year's $862 billion economic stimulus package.


"The true engines of job creation here in America are America's businesses," Obama said in Tampa. "And there are several steps we can take to help them expand and hire new workers."


In the coming weeks, he and other members of his administration will fan out across the country to promote other pieces of his jobs agenda, including infrastructure and energy projects.


The House passed a $154 billion jobs bill in December, including infrastructure spending, aid to state and local governments and extended unemployment benefits -- all parts of last year's stimulus. Senate Democrats hope to introduce a smaller package next week, which could include a jobs tax credit being pushed by several senators.

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This page contains a single entry by Ernest Roberts published on January 29, 2010 3:53 PM.

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