Passed in March, the HIRE Act offers an exemption from Social Security payroll taxes for every worker hired after February 3, 2010, and before January 1, 2011, who has been unemployed for 60 days or longer. The maximum value of the credit is equal to 6.2% of wages up to $106,800, the Federal Insurance Contributions Act wage cap. There is also an additional $1,000 income tax credit for every new employee retained for 52 weeks, creditable on on the employer’s 2011 income tax return.
The Internal Revenue Service’s data on the HIRE Act will not be available until after the filing of tax returns in 2011. However, the Treasury Department’s Office of Economic Policy has provided estimates on employers who potentially qualify for the HIRE tax exemption.
According to the report, between February and October this year, businesses hired an estimated 8.1 million new workers who had been unemployed for 60 days or longer. Such businesses are thus eligible for HIRE tax exemptions and credits.
These newly hired workers constitute approximately 11.7% of all workers who were unemployed for eight weeks or longer since the law’s passage. This means that one in eight workers who have been unemployed for eight weeks or longer are hired in the subsequent month.
The report also shows estimates by state on the number of eligible hires. Many states with high unemployment rates have large numbers of potentially eligible new hires. This includes California (over 1.1 million), Ohio (around 350,000), and Michigan (over 260,000).
“Targeted programs like the HIRE Act tax credit provide an incentive for private-sector employers to hire new workers sooner than they otherwise would,” said Alan B. Krueger, Assistant Secretary for Economic Policy and Chief Economist at the Treasury Department. “Since it’s only in effect through the end of the year, the HIRE Act encourages businesses to accelerate hiring in order to get the maximum benefit from this temporary tax credit.”