President Obama plans to propose a $33 billion tax credit to encourage small businesses to hire workers and raise wages in 2010, according to an administration official. The plan was alluded by Obama in the State of the Union address, where he claimed he would make jobs priority number one. It will grant a $5,000 tax credit for every net new worker hired in calendar 2010. The amount will be capped at $500,000 per firm to make sure that the bulk of the benefits go to small businesses.
In addition to the jobs credit, firms increasing wages or hours for their workers will be reimbursed for the social security payroll taxes they pay on the real increase in their payrolls. This measure is included in the $500,000 cap to make sure the benefits stay focused mostly on small businesses. Obama will propose to pay for the plan with savings from a $700 billion bank bailout fund, the official said, but made plain that this would be up to the Congress to decide. In addition, Obama wants to use a further $30 billion from TARP to aid the flow of credit through community banks to small businesses. The White House said there would be more details on this aspect of Obama's job strategy in the coming weeks.
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