Nurse, What's the Patient's Condition? Well, Doctor, His Heart at Least Appears to be in the Right Place, But His Head is Firmly Wedged Up His Ass.

I'm going to give the President more credit than he deserves and assume for purposes of this post that his heart is in the right place and his intentions are what he states them to be. Having said that, offering a $5,000.00 tax credit for increased payroll (new hires or new raises) is idiocy and someone's attempt at a public relations game because they assume all of us aren't paying attention. An employer pays one half of the employee's Medicare and Social Security taxes, or about 7.65% of the gross pay received by the employee. The proposed tax credit would only offset the cost of this payroll tax. The rest of the employee's wages are a burden on the business. The incentive therefore to hire an extra employee is minimal. Let's assume your small business hires a full time employee at the minimum wage, thus the minimum cost to the business. At 40 hours per week and $7.25 per hour, that employee (assuming he maximizes his work with no vacation, holidays or sick days, will earn a gross pay for the year of $15,080.00, of which the employer will shoulder $1,153.62. The employee, under normal circumstances, would cost the employer $16,233.62 (not including costs of training programs or other costs such as uniforms, additional insurance expenses, etc.). President Obama's proposal would allow the business at the end of the year, to essential recoup $1,153.62 of the taxes it had given as an interest free loan to the government. Meanwhile, that employee still costs $15,080.00 to the employer who has to have realized an increase in productivity and profit which would justify the hiring. Not only that, from what I've heard so far, the employee would have to work the full year to realize the tax credit. Thus, if he or she is incompetent and is fired or quits for whatever reason, the employer does not realize the credit. There is thus a great deal of uncertainty attached to the hiring and the receipt of a credit that is set off at the end of the year rather than something that can be immediately budgeted as a matter of certainty. To receive the maximum credit of $5,000.00 you have to pay the employee over $60,000.00, so it only gets more expensive as you attempt to get more of a credit.

Now ask yourself, does this make you think you'd hire someone or consider giving a raise if this is your only incentive?