President Obama Proposes Small Business Tax Breaks

President Obama is proposing tax breaks to companies to hire workers or pay them higher salaries. The tax breaks would target small businesses and refund 10 percent of the cost of new payroll — in the form of new hiring or new wages — up to a total of $500,000 next year.

It is estimated that this credit would help nearly 2 million small businesses and is focused on middle-class workers and small businesses.

The proposal appeared in the president’s February 2013 budget request this year and, at a cost of about $30 billion, was rejected by Republicans. It appeared again in a statement released early Tuesday calling on Congress to immediately extend tax cuts for middle-class earners that are set to expire at the end of the year (fiscal cliff).

President Obama also called for allowing companies to deduct the full cost of investments from their taxes, a proposal that would allow companies to save $5 - $50 billion next year on taxes.

A jobs credit could be a cost-effective way of raising employment in the short run. The effectiveness of any jobs subsidy depends on how employers perceive its potential benefits when making hiring decisions.  (Wash Post, 11/27/2012)