On Wednesday, February 24, 2010, the U.S. Senate passed the Hiring Incentive to Restore Employment Act (the “HIRE Act”). The HIRE Act, which was passed in a 70-28 vote, includes a new jobs creation payroll tax exemption for employers. Specifically, the HIRE Act provides employers with an exemption from having to pay their portion of the 6.2% Social Security payroll tax for every worker hired after February 3, 2010 and before January 1, 2011 who was previously unemployed for a period of at least 60 days. The HIRE Act also provides a $1,000 employee retention income tax credit for every new employee retained for 52 weeks. The tax credit is to be taken on the employer’s 2011 income tax return. The Senate’s HIRE Act now must be sent to the House, where it will likely be reconciled with the House version that was passed in December 2009.
According to Senate Finance Committee Chairman Max Baucus (D-Mont.), “the HIRE Act is a targeted approach that will cut taxes for businesses, helping them grow and hire more employees and create new jobs rebuilding America’s crumbling infrastructure. Today’s passage of the HIRE Act is the first step in the Senate’s job agenda to put Americans back to work and strengthen our economy.” Critics of the HIRE Act suggest that its tax-based hiring incentives will not promote the hiring of new employees fast enough to be meaningful.