In an op-ed published today in The New York Times, Sen. Charles Schumer, D-N.Y., and Sen. Orrin Hatch, R-Utah, propose that any private-sector employer that hires a worker who had been unemployed for at least 60 days not have to pay its 6.2 percent Social Security payroll tax on that employee for the duration of 2010.
Workers would have to be hired for a minimum of 30 hours per week. And nepotists need not apply: The employer's family members would not be eligible. And job shedders would have to bulk up: if the company had a lower total payroll in 2010 than it had in 2009 it would have to forfeit the benefit.
"The beauty of this proposal goes beyond its simplicity. Unlike a jobs tax credit of a specific dollar amount, this credit is 'front-loaded' in that it provides an incentive for businesses to hire workers earlier in the year — because the tax benefit will be greater. A $60,000 worker hired on Feb. 1 will save a business about $3,400 in taxes, while that same worker hired on May 1 will save it about $2,500," they write.
Because the credit is relative to salary, Schumer and Hatch say their plan is not biased toward earners at either end of the pay scale, though an additional bonus credit on the company's 2011 return could be earned if the worker hired in 2010 stays on the job for at least a year.
"Our two-pronged approach would be a far more efficient use of taxpayer dollars than other proposals under discussion, all of which could cost many times more with very little guaranteed improvement in unemployment," they write.
The Senators described the proposal as "simple, straightforward and easy to explain and administer," and promise that the reduction in Social Security taxes collected would be more than offset by increased revenues collected from the newly-hired.
"Imagine that three million unemployed workers were to be hired this year under our plan," they write. "If they all worked an average of six months in 2010 at a salary of $50,000, and every single one stayed on payroll for 52 consecutive weeks into 2011, the gross cost of the Social Security tax cut and the additional credit would be only $7.6 billion. And that's before we consider the offsets from income and payroll taxes paid by these workers."
Three million workers each earning $50,000 a year represents $150 billion in income. The FICA withholding for Social Security from these newly-hired employees would amount to $9.3 billion.
"A Payroll Tax Break for Jobs" (New York Times, 1.26.10)