About six months ago, a bipartisan effort to kickstart the economy in the form of new tax incentives, was signed into law by President Obama. The Hiring Incentives to Restore Employment (HIRE) Act, referred to as the HIRE Act, offered a tax break to businesses who hired previously unemployed workers. The break basically exempted employers from their share of Social Security taxes on wages paid to qualified new hires. Additionally, the law allowed a $1,000 income tax credit to those same businesses for every new employee that remained on the payroll for 52 weeks.
It’s hard to tell whether the bill is a success or whether the economy is just picking up naturally. The overall impact of the bill, then, is a bit in dispute. What is undisputed is that businesses will be able to take advantage of the new tax breaks to the tune of about $8.5 billion. That’s the figure that the Department of Treasury is putting on the breaks attributable to the 4.5 million new hires claimed so far under the Act (you can download a copy of their report as a pdf here).
Those kind of numbers haven’t gone unnoticed. The tax credit under the Act is scheduled to expire at the end of 2010. Sen. Charles Schumer (D-NY) who co-sponsored the credit together with Sen. Orrin Hatch (R-UT) has suggested extending it until mid-2011. In his statement supporting the extension, Schumer said:
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. 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.
Sen. Hatch, however, isn’t quite as enthusiastic, noting that he wanted to see the “the totality of the legislation.”
The full impact of the bill will likely not be apparent until final employment figures come out.
