HIRE Act

A commenter notes that Congress has already passed a jobs bill that includes subsidies for employers to hire new workers. The president signed the legislation, called the HIRE Act, into law in March. Among its provisions:

The idea is to reinvigorate the economy by encouraging new jobs with tax incentives. To qualify, hiring must occur after February 3, 2010, and before January 1, 2011. In addition:

• Individuals hired must have been unemployed for at least 60 days.
• Those individuals must be able to certify "by signed affidavit" and under penalty of perjury, that they "have not been employed more than 40 hours in the 60-day period ending on the date such individual gains such employment."
• No credit is available if the individual is hired to replace a person who is terminated, "unless such other person is separated from employment voluntarily or for cause."

The "encouragement" has two components

The first component [suspension of payroll taxes] has a maximum value equal to 6.2 percent of wages paid in 2010, up to $106,800 (the FICA wage cap). This benefit is realized as soon as the first payroll deposit is due since employers will not be required to pay the employer-share of Social Security tax on the wages of the new employee.

The second component is in the form of a $1,000 credit (maximum) for each new employee retained for 52 consecutive weeks. Wages paid in the last 26 weeks must equal at least 80 percent of wages paid in the first 26 weeks. This credit can be taken on the employer’s income tax return filed in 2011.

This seems to be quite similar, though a bit smaller in the magnitude of the benefit, to the legislation proposed in my previous post. Restricting eligibility to people unemployed for 60 days or more may narrow the scope somewhat relative to the proposal and make it more difficult for companies to implement, but is probably useful in restricting companies' ability to game the legislation.