SCHUMER, HATCH UNVEIL TARGETED JOB CREATION BILL
Senators Believe Payroll Tax Cut Most Effective, Affordable Way to Get America Back to
Work
WASHINGTON – U.S. Senators Chuck Schumer (D‐New York) and Orrin Hatch (R‐Utah) unveiled
targeted legislation today that they believe would be most effective at putting the American
people back to work. The Hire Now Tax Cut Act of 2010 would grant any private‐sector
employer that hires a worker who had been unemployed for at least 60 days to not have to pay
the employer’s 6.2 percent share of the Social Security payroll tax on that employee for the
remainder of 2010.
“This proposal shows how much we can do to help create jobs when politics is put aside. Our
payroll tax cut is a simple, cost‐effective and bipartisan solution. It will help put more Americans
to work right away,” Senator Schumer said.
“While Senator Schumer and I disagree on most issues, we’ve been able to come together on an
affordable, effective and targeted proposal to get the American people back to work,” said
Hatch. “As a conservative, this proposal isn’t about more and more government spending; it’s
about tax relief to get employers hiring again, which is exactly what millions of unemployed
Americans most desperately need.”
The Senators cite five reasons why the payroll tax holiday is the best means of spurring
job creation:
• Simple. This proposal is not only easy to explain, but easy to administer –
avoiding waste, fraud and abuse.
• Focused. It is exclusively focused on hiring unemployed workers.
• Front‐loaded. It provides an incentive for businesses to hire workers earlier in
the year.
• Immediate. It puts money into a business to start hiring immediately.
• Affordable. It will cost substantially less than other proposals.
Unlike various other tax credit proposals, this payroll tax holiday would go immediately
to a business’ bottom line – there would be no waiting until 2011 to receive a tax credit.
As an additional incentive, for any qualifying worker hired under this initiative that the
employer keeps on payroll for a continuous 52 weeks, the employer is eligible for an
additional non‐refundable $1,000 tax credit after the 52‐week threshold is reached, to
be taken on their 2011 tax return. In order to be eligible, the employee’s pay in the
second 26‐week period must be at least 80 percent of the pay in the first 26‐week
period.
Workers hired after the date of introduction are eligible for the payroll tax forgiveness
and the retention bonus, but only wages paid after the date of enactment receive the
exemption from payroll taxes.
A document fully outlining the proposal is below.
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Senators Charles E. Schumer and Orrin Hatch
“HIRE NOW TAX CUT ACT OF 2010”
February 3, 2010
BASIC CONCEPT: Starting immediately after enactment, any business that hires a
worker that had been without full‐time work for at least 60 days prior to employment
can 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.
Unlike various tax credit proposals, the benefits under the “Hire Now Tax Cut” go
immediately into a business’ bottom line – no waiting until 2011 to receive a tax credit.
And since the benefit starts immediately after enactment and does not have an
arbitrary cap, it will facilitate utilization because some of the past issues with payroll
software are avoided.
For any qualifying worker hired under this incentive that the employer keeps on payroll
for a continuous 52 weeks, that employer is eligible for an additional $1,000 tax credit
after the 52‐week threshold is reached, to be taken on their 2011 tax return. In order to
be eligible, the employee’s pay in the second 26‐week period must be at least 80
percent of the pay in the first 26‐week period.
Workers hired after the date of introduction (February 2) are eligible for the payroll tax
forgiveness and the retention bonus, but only wages paid after the date of enactment
receive the exemption from payroll taxes.
EXAMPLES OF TAX SAVINGS:
􀂾 Hire a $50,000 worker on March 1, save $2,583.
􀂾 Hire a $90,000 worker on April 1, save $4,185.
􀂾 Hire a $60,000 worker on May 1, save $2,480.
ADDITIONAL FEATURES:
The tax benefit applies only to private‐sector employment, including nonprofit
organizations – public sector jobs are not eligible for either benefit.
Employees who are immediate family members of the employer do not qualify.
There is no minimum weekly number of hours that the new employee must work for the
employer to be eligible, and there is no maximum on the dollar amount of payroll taxes
per employer that may be forgiven.
For workers that would otherwise be eligible for the Work Opportunity Tax Credit, the
employer must select one benefit or the other for 2010 – no double‐dipping.
A worker who replaces another employee who performed the same job for the
employer is not eligible for the benefit, unless the prior employee left the job voluntarily
or for cause.
For the retention bonus to be paid, the worker’s wages during the second 26‐week
period must be at least 80 percent of the wages during the first 26‐week period.
Lost Social Security Trust Fund revenues will be supplemented by the General Fund.
ADVANTAGES/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 proposal provides an incentive for businesses to hire workers
earlier in the year, because the tax benefit will be greater. A $60,000 worker
hired on March 1 will save a business about $3,100 in taxes, while that same hire
delayed until May 1 will save about $2,500.
• Immediate. In the current environment, no business should have to wait until
2011 to receive tax relief for hiring. Our proposal puts money into a business'
cash flow immediately, since the tax is simply not collected in the first place.
• Affordable. Because this provision is targeted towards hiring the unemployed,
as opposed to providing a tax benefit for any increase in payroll, its cost should
be more affordable at a time of record budget deficits