President Obama has fleshed out one of the jobsprovisions he outlined in last week's State of the Union address.The Small Business Jobs and Wages TaxCredit is intended to provide American businesses with short-term incentives tonot only create jobs but to increase wages and hours for Americans with jobswho face ongoing economic uncertainty in the current environment.


Highlights of the proposal include:


• A tax credit of up to $5,000 for employers againsttheir payroll taxes for every net new employee they hire in 2010. The credit isdesigned to help jumpstart job growth by giving employers an incentive to addjobs or accelerate the hiring they would have done later in the future.Start-ups would be eligible for half the credit. The credit would beadministered off an employer's unemployment insurance wage base (equal to 72%of the unemployment insurance wage base increase, or a $5,000 credit for eachadditional worker who earns at least $7,000).


• An additional tax credit to reimburse payroll taxes onincreases in inflation-adjusted payrolls. Businesses will receive a bonus 6.2%tax credit on aggregate wages in excess of inflation - reimbursing the employerfor the Social Security payroll taxes they pay on those payroll increases. Thisprovides firms with an incentive to increase wages or work hours for existingemployees, as well as hiring new employees at a higher wage. This wage bonuswould be calculated off the Social Security payroll tax base, so firms wouldnot get credit for increasing wages for employees making more than the currenttaxable maximum of $106,800.


• A cap at $500,000 per business to incentivizesmall-business hiring. All firms with net employment increases would beeligible for these credits. But to ensure that small businesses receive thebulk of the incentive to hire, the maximum credit will be limited to $500,000per business.


• Anti-abuse provisions to ensure that employers do notgame the system. Businesses that reduce employment or payrolls in 2010 would beineligible for both the $5,000 credit and the wage bonus. The credit would alsoinclude anti-abuse provisions designed to deny or limit the credit to employersthat seek to game the system by, for example, replacing full-time employeeswith part-time employees. This will include limiting the maximum jobs creditamount to 25% of the increase in a firm's Social Security payroll wage base. Inaddition, rules would prevent businesses from renaming themselves or merging inorder to claim the credit.


• Quarterly payment option to accelerate payments tofirms. Employers would have the option of receiving the tax credit on aquarterly estimated basis. This helps get money in the hands of employersearlier in the year, could help increase awareness of the credit and providesan early incentive to hire.


However, Susan Eckerly, senior vice president of theNational Federation of Independent Business, remained skeptical about theeffort: "Unfortunately, there isn't a quick fix for job creation. Awell-intentioned tax credit proposal is not going to convince small businessowners to add jobs if they don't have work for those employees to do."

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