FOR IMMEDIATE RELEASE: July 14, 2010
SCHUMER PUSHES FOR 6 MONTH EXTENSION OF HIS BIPARTISAN "HIRE NOW TAX CUT"; BUSINESSES WILL HAVE CONTINUED INCENTIVE TO HIRE NEW YORKERS WHO HAVE BEEN OUT OF WORK FOR 60 DAYS OR MORE
Today, U.S. Senator Charles E. Schumer announced that he is pushing for a 6 month extension of his bipartisan “Hire Now Tax Credit” for small businesses that was signed into law by President Barack Obama in March of this year. Since the tax cut was enacted almost 4.5M people who were unemployed for over 60 days have been hired according to a Department of the Treasury report issued this week. Schumer said that this success merits a 6 month increase of the tax exemption that would have otherwise expired at the end of this year.
“The fact that 4.5 million workers have been hired since we enacted our tax cut for businesses shows that this plan is targeted, timely and exactly what the doctor ordered,” Schumer said. “It’s critical that we extend this for another 6 months so more of our businesses can take advantage of the program and so that more middle class families can find work.”
Under the law passed in March, businesses avoid paying the employer’s share of Social Security taxes on that worker for the duration of 2010. The more a business pays a worker (up to the maximum Social Security wage of $106,800), and the longer a business has a worker on its payroll, the greater the tax benefit – so there is an incentive to hire people sooner, and pay them more. The benefits go immediately into a business’ cash flow – no waiting until the next year to receive a tax credit. With the extension, any business hiring a new worker will not have to pay their share of Social Security taxes through June, 2011. Businesses will not receive an additional 6 months of tax benefits for workers that have already been hired – the extended tax credit will only apply to workers hired after the date of its enactment. Additionally, workers who have had temporary work in the last 60 days - working as a U.S. Census taker, for example - will still be eligible for the tax credit.
Because the tax benefits currently only last through the end of the year, businesses have an incentive to hire immediately. By extending the tax credit for 6 months, businesses will have an increased incentive to hire. For example:
· Under the current law, with the tax credit expiring at the end of 2010, a business that hires a worker making $40,000 in August will save a total of $1,003. If the tax cut is extended for six months, that same business hiring the same worker will save $2,273.
· Under the current law, with the tax credit expiring at the end of 2010, a business that hires a worker making $70,000 in September will save a total of $1,446.67. If the tax cut is extended for six months, that same business hiring the same worker will save $3,616.67.
On Monday, the Treasury Department released a report showing that since the program’s enactment 4.5 million eligible workers have found employment making their employer eligible for the tax cut. The business tax cut plan is working because it offers clear benefits to employers:
· Simple. The tax cut is easy to explain and administer: “No employer payroll taxes on unemployed workers hired in 2010.” Since the proposal is for a complete elimination of the 6.2 percent payroll tax for eligible workers, rather than a fixed or capped dollar amount, employers will know to simply zero out the tax for eligible workers.
· Focused. Given our budgetary constraints and the nagging problem of long-term unemployment, any employment incentive should be focused on the hiring of workers who are currently unemployed. Only by focusing on the unemployed can we get people off the unemployment rolls at an affordable cost to taxpayers. Plus, unlike some versions of a payroll tax holiday, this proposal is not biased towards either low-wage or high-wage workers. Under the Schumer-Hatch plan, a business saves 6.2 percent on both a $40,000 worker and a $90,000 worker.
· Front-Loaded. The credit provides an incentive for businesses to hire workers immediately, because the tax benefit will be greater. If the 6 month extension becomes law, a $60,000 worker hired on August 1 will save a business about $3,410 in taxes, while that same hire delayed until May 1 will save about $2,170.
· Immediate. In the current environment, no business wants to wait until 2011 to receive a tax credit. Our proposal puts money into a business' pockets immediately, since the tax is simply not collected in the first place.
· Affordable. If three million unemployed workers are hired this year under this plan, and they all work an average of six months (some more, some less) at an average salary of $50,000, and every single one stays on payroll for 52 consecutive weeks, the gross cost to taxpayers would be only $7.6 billion over two years – and that’s before considering the offsets from income and payroll taxes paid by these workers.
Overall, there are 310,500 people in Upstate New York and Long Island eligible for hire under the tax cut program if it is extended for another six months. Below is a region-by-region breakdown of how many people in each county are eligible for the hire under the program:
o In the Capital Region, about 31,100 people are eligible to be hired under this tax cut.
o In Western New York, about 40,800 people are eligible to be hired under this tax cut.
o In the Rochester-Finger Lakes Region, about 34,300 people are eligible to be hired under this tax cut.
o In the Southern Tier, about 21,900 people are eligible to be hired under this tax cut.
o In Central New York, about 29,000 people are eligible to be hired under this tax cut.
o In the Hudson Valley, about 60,200 people are eligible to be hired under this tax cut.
o In the North Country, about 17,000 people are eligible to be hired under this tax cut.
o In Long Island, about 76,200 people are eligible to be hired under this tax cut.
There are some additional rules that are in place in the program. For example, workers who are family members of the employer are not be eligible. The payroll tax reduction is for private-sector jobs only; new jobs that are created by tax dollars in the first place are not eligible. To promote long term employment, the plan also adds the following bonus: For any eligible employee kept on payroll for a continuous 52 weeks, the employer receives an additional $1,000 credit on its 2011 tax return. For the retention bonus to be paid, the worker’s wages during the second 26-week period must be at least 80 percent of the wages during the first 26-week period.
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