President Barack Obama on Friday proposed a $5,000 tax credit per new employee in 2010 as well as tax break for salary increases.
He announced the new proposals to spur job creation as 1 in 10 U.S. workers is currently unemployed.
The new employee tax break would apply in 2010. The salary increase tax break would apply to employees making under $100,000. The bonus would be based on social Security payrolls, so it wouldn't apply to wage increases above the current taxable maximum of $106,000.
The tax break for any one firm would be limited to $500,000. It is expected that the measure will cost about $33 million for the federal government.
We'd refund your payroll taxes for every dollar that you increase those wages faster than inflation, Obama said.
He expects that these measures would cut taxes for more than 1 million small businesses. Employers would be able to receive the money every quarter, instead of at the end of the year, he said.
You wouldn't get a tax credit for doubling your workforce while cutting the hours of each worker in half, he said. We're not going to let you game the system to take advantage of the tax credit, unless you're doing right buy your workers.