FACTBOX-Obama plans $33 billion job and wage tax credit
WASHINGTON, Jan 28 (Reuters) – U.S. President Barack Obama plans a $33 billion tax credit to encourage small businesses to hire workers and boost wages. Details of the plan, which will be laid out on Friday when the president visits a small business in Baltimore en route to speak to Republican lawmakers holding a retreat there, include:
* Businesses will receive a $5,000 tax credit for every net new employee they employ in 2010. The total amount of the credit for any one firm will be capped at $500,000, to ensure the majority of the benefit is targeted at small businesses. Start-ups will be eligible for half of the tax credit.
* Businesses that increase wages or hours for their existing employees will be reimbursed for the Social Security payroll taxes they pay on real increases in their payrolls. This bonus would be based on Social Security payrolls, so it would not apply to wage increases above the current taxable maximum of $106,800.
* Firms will be able to claim the credit on a quarterly basis, which the White House hopes will get money out to businesses quickly and provide an early incentive to hire and increase payrolls.
* $33 billion cost, estimated by the U.S. Treasury and based on tax-change simulations run on its economic models.
* Proposal envisages being paid for out of savings from TARP bank bailout
* Retro-actively effective for the whole of calendar 2010.
* Anti-abuse provisions to ensure that employers do not game the system. Businesses that reduce employment or payrolls in 2010 would not be eligible for both the $5,000 credit and the wage bonus.
* The credit would also include anti-abuse provisions designed to deny or limit the credit to employers that seek to game the system by, for example, replacing full-time employees with part-time employees. This will include limiting the maximum jobs credit amount to 25 percent of the increase in a firm’s Social Security payroll wage base.
* Rules would also prevent businesses from renaming themselves or merging in order to claim the credit. (Reporting by Alister Bull; Editing by Eric Walsh))
((Washington newsroom, 1-202-898-8300))