Wednesday, March 24, 2010

HIRE Act clarification

Earlier I commented upon the requirement that only "new" employees qualify for the payroll tax forgiveness under the HIRE Act.  The law is not quite that restrictive, after all.  There are provisions to prevent "churning" employees to secure the credit, but if an employee quits or is fired for cause, the employer gets the tax benefit for the replacement.  So there doesn't have to be a net increase in the number of employees.

That helps to explain why the CBO  put such a high price tag on the tax provision. I can readily believe there will be 5 million job changers this year, even if unemployment doesn't fall. So the issue is, how many will have been unemployed for 60 days?  Could be many of them.

Also, if a closed factory is reopened, all the laid-off workers who go back to work are qualified as "new" for purposes of the payroll tax break.  I don't know that many factories are on the verge of reopening, but perhaps there are some in the auto industry.

No comments: