President Obama presented a new payroll tax credit incentive for small businesses yesterday. He proposed a $5000 tax credit for each new employee. The credits will be given on a quarterly basis against income tax, according to an article in the NY Times:
“…Under the proposal, a firm that hires a new employee in 2010 would get up to a $5,000 credit against its income tax. Alternatively, a company that hands out raises above the inflation rate in 2010 would get an income tax credit equal to the additional Social Security taxes it would pay on the increase. Although effectively similar to a payroll tax holiday for an employer, as an income tax credit, the raise incentive would not actually reduce payments to the Social Security trust fund.
The tax credit would be available to employers on a quarterly basis, which, the White House says, would encourage early hiring. It would also be retroactive to the start of the year. And while any business could claim the credits, they would be capped at $500,000 for each business. The administration estimates that one million businesses will take advantage of the credit, according to a senior administration official who insisted on anonymity because he didn’t wish to pre-empt the president’s announcement, and the vast majority of them will be small companies…” read Times article here.
Of course there is some controversy around this newest initiative, but I applaud any new effort to help small businesses grow. Now, if only our government would come up with something that would help small businesses who can’t afford (or don’t need) new hires.
Susan Martin, Small Business Financial Management
