Schumer: Congress Passes His Bipartisan "Hire Now Tax Cut"; Businesses Will Have New Incentive to Hire People Who Have Been Out of Work for 60 Days or More

Press Release

Today, U.S. Senator Charles E. Schumer announced that his bipartisan "Hire Now Tax Cut" proposal to provide businesses that hire unemployed workers with a tax cut has cleared final passage in Congress and will now go to the President's desk for signature. Schumer recently joined with Orrin Hatch (R-Utah) to offer a tax cut to businesses that hire a worker that has been without work for at least 60 days prior to employment. The businesses will avoid paying the employer's share of Social Security taxes on that worker for the duration of 2010. The more a business pays a worker (up to the maximum Social Security wage of $106,800), and the longer a business has a worker on its payroll, the greater the tax benefit -- so there is an incentive to hire people sooner, and pay them more. The benefits go immediately into a business' cash flow -- no waiting until 2011 to receive a tax credit. The "Hire Now Tax Cut" is part of the HIRE Act that just passed Congress this morning and will soon be signed by President Obama.

"Passage of the "Hire Now Tax Cut" brings thousands of unemployed New Yorkers that much closer to finding a job," Schumer said. "Both sides of the aisle have heard the call to focus on jobs. This proposal is not a panacea, but it will start the long process of putting people back to work."

Schumer said that the Schumer-Hatch proposal has many advantages over previously suggested hiring related tax cut ideas, and has therefore received an overwhelmingly positive reaction from lawmakers on both sides of the aisle, as well as the White House. Schumer said the plan had the following advantages and benefits:

· Simple. The Schumer-Hatch idea is easy to explain and administer: "No employer payroll taxes on unemployed workers hired in 2010." Since the proposal is for a complete elimination of the 6.2 percent payroll tax for eligible workers, rather than a fixed or capped dollar amount, employers will know to simply zero out the tax for eligible workers.

· Focused. Given our budgetary constraints and the nagging problem of long-term unemployment, any employment incentive should be focused on the hiring of workers who are currently unemployed. Only by focusing on the unemployed can we get people off the unemployment rolls at an affordable cost to taxpayers. Plus, unlike some versions of a payroll tax holiday, this proposal is not biased towards either low-wage or high-wage workers. Under the Schumer-Hatch plan, a business saves 6.2 percent on both a $40,000 worker and a $90,000 worker.

· Front-Loaded. The credit provides an incentive for businesses to hire workers earlier in the year, because the tax benefit will be greater. A $60,000 worker hired in March will save a business about $3,000 in taxes.

· Immediate. In the current environment, no business wants to wait until next quarter or next year to receive a tax credit. Our proposal puts money into a business' pockets immediately, since the tax is simply not collected in the first place.

· Affordable. The Joint Committee on Taxation estimates that this provision will cost $13 billion, a far lower cost than other proposals that are not focused on the unemployed, or that would give a credit based on any increase in payroll.

The payroll tax reduction will be for private-sector jobs only, although nonprofit organizations and state institutions of higher education would be eligible; new jobs that are created by tax dollars in the first place would not be eligible. An employer cannot receive the benefit for hiring someone to replace an existing worker, unless that worker left voluntarily or for cause. To reduce double-dipping, an employer would also have to choose whether they wanted an employee to be eligible for the payroll tax relief or the work opportunity tax credit (WOTC), but not both. Finally, to promote long term employment, the plan also adds the following bonus: For any eligible employee kept on payroll for a continuous 52 weeks, the employer would receive an additional $1,000 credit on its 2011 tax return

Schumer offered the following examples of savings that businesses would receive under this proposal:

· Hire a $35,000 worker in March, save $1,808.

· Hire an $80,000 worker in April, save $3,720.

· Hire a $70,000 worker in May, save $2,893.

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