OVERVIEW

·        Each business would receive a tax credit of up to $5,000 for every net new employee hired in 2010.

·        Maximum total credits allowed per business = $500,000.

·        Benefit would be available to any business, regardless of size.

·        Companies could claim the credit on a quarterly basis, a provision designed to get them money quickly and provide an early incentive to boost payrolls.

·        The benefit is designed to be retroactive to Jan. 1 and would expire at the end of the year.

·        Start-up businesses would be eligible for half of the credit and non-profit groups could also qualify. The benefit would not apply to government hiring.

·        White House said in a fact sheet its rules would prevent businesses from renaming themselves or merging simply to claim the credit.

·        Obama also proposed a reimbursement of the Social Security taxes businesses pay on increases in their payrolls this year. Firms could earn the credit by raising wages or increasing the hours of their current workers, as well as by hiring new employees. The tax credit would be adjusted for inflation, and would not apply to wage increases above the current taxable maximum of $106,800.

·        The tax credits and payroll tax reimbursements would not be available to any firms that reduce employment or payrolls in 2010 or replace full-time workers with part-timers.

Despite support from Democratic leadership, the plan's fate is not assured. Similar proposals have failed on concerns that they would pay businesses to hire people they would have added anyway. Most small businesses have already dismissed the credit's impact on hiring new employees and will take a wait and see approach until Novemnber's election in the hope for some real leadership to emerge on economic stimulus in the form of accross the board tax cuts.