As the dust settles on the tax deal, let's hope our legislators don't forget about the 15 million unemployed Americans who can use some help getting back to work. Lower income taxes don't really matter if one doesn't have an income.
One of the most significant hiring incentive programs of the past decade has been the bi-partisan Hiring Incentives to Restore Employment (HIRE) Act, which provides payroll tax savings and income tax credits to both for-profit and non-profit employers that hire people who have been unemployed. The highly touted program has received praise from both sides of the aisle as an important part of the government's job creation agenda.
As recently as a few weeks ago, President Obama was including an extension of the program in the tax package, part of the "Obama Tax Cuts." The program provides an average of $1,200 (and up to $7,600) in tax benefits per qualified employee hired by almost any private employer in the United States since February of 2010. The recently passed tax bill, however, replaces the HIRE Act incentive with a 2 percent employee payroll tax holiday. This approach, while providing a temporary boost to consumer spending power, does not replace the incentive to businesses to hire new employees.
The good news is that an extension of the HIRE Act would provide a lot of those benefits at less than a tenth of the cost of the broad-based payroll tax holiday.
The numbers show that the program may have been a factor in the drive for increased employment. In the first eight months of the program, the national unemployment rate dropped from 10.2 percent to 9.0 percent, a significant improvement. As the program expires in December, the rate, already at 9.3 percent, is rising again. According to the Treasury Department, businesses hired 5.6 million new workers who qualified for the HIRE Act between February and June. Also, businesses saved $6.2 billion in payroll tax reductions and will receive an estimated $4.2 billion in additional tax credits for retaining the formerly unemployed for at least one year.
Sen. Charles Schumer of New York thinks another six months would make a tremendous impact as more businesses take advantage of the program "so that more middle class families can find work." Schumer, a Democrat, is joined by Republican Sen. Orrin Hatch of Utah in a bipartisan push to extend the act. If passed, it will allow employers to take advantage of the HIRE Act's benefits through June 30, 2011. The bill is one of several in Congress that would extend the jobs incentive.
The business community applauds the recent efforts by Congress to promote economic growth and opportunity. Extend the HIRE Act and make sure that one of the better incentive programs continues to encourage employers to give jobs to those who need them the most.
Brandon Edwards is president of The Tax Credit Company, a leading provider of tax incentive consulting, administration and technology. The company has secured over $400 million in tax credits for its clients, which range from small business to Fortune 100.