WASHINGTON, D.C. – Today, the Joint Economic Committee (JEC), Chaired by U.S. Senator Bob Casey (D-PA), released a new report finding that targeted tax credits may provide additional incentives for business owners to add workers, and would be particularly beneficial for small businesses, which account for a substantial majority of business establishments and are responsible for a significant share of the hiring during the recovery.
The report entitled, “Tax Incentives for Small Business Hiring and Investment: Strengthening the Backbone of the Economy,” finds that enacting a tax credit for businesses that hire additional workers or increase the hours and wages of existing employees would help to sustain and accelerate the recovery. While private-sector employers have added jobs for 28 consecutive months, the pace of job growth has moderated in recent months.
“Small businesses are critical to our economic growth,” said Chairman Casey. “We must continue to support job creation by targeting tax incentives to those that hire more employees and grow their business.”
The nonpartisan Congressional Budget Office has determined that a well-designed tax credit for increasing payroll is among the most effective policies for promoting growth and putting people back to work. Based on current average weekly earnings of private sector employees, a business would receive a tax break of approximately $4,200 over the course of the year for hiring an additional worker paid the average amount. Additionally, extending the 100 percent depreciation deduction for major purchases through 2012 would reduce the cost of investment and promote economic growth.
“The Small Business Jobs and Tax Relief Act (S. 2237), will provide businesses with tax cuts for hiring new workers and investing in their business. Many small businesses want to expand and hire more workers and this bill will help them do that now,” said Chairman Casey.
The Small Business Jobs and Tax Relief Act, which the Senate is expected to vote on this week, would provide a tax credit of 10 percent of the excess of 2012 payroll over 2011 payroll for firms that expand payroll. In order to target the tax credit to small businesses, the proposed credit is capped at $500,000 per firm, or 10 percent of a payroll increase of $5 million. Additionally, it would extend the 100 percent depreciation deduction for major business investments through 2012.
Continued Casey, “Small businesses are the backbone of our economy and Congress must make sure that they have the support they need to help put more Americans back to work. Our recovery continues to make progress, but we must do everything we can to spur immediate job creation.”
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