Senator Proposes Tax Cut for Employers Who Increase Pay

January 28, 2010 ( - U.S. Senator Russ Feingold (D-Wisconsin) has introduced legislation creating a temporary jobs tax credit over the next two years for businesses that hire new employees, expand work hours for their current workforce, or raise worker pay.

According to a Feingold press release, the tax credit would equal 15% of the increase in eligible payroll for 2010 and 10% of the increase in 2011. Calculation of the credit would be based on a firm’s total eligible payroll so it would reward firms that expand work hours or raise pay as well as hiring more workers, and it would be calculated on a quarter over year-ago-quarter basis to avoid seasonal employment spikes.

Under the proposal, pay hikes for high-salary workers ineligible, as are wages of firm owners and their family members.

The press release said the Congressional Budget Office recently released a report indicating that a tax break such as Feingold’s proposal would be among the most efficient and effective ways to spur employment.  The CBO report estimated a similar jobs tax credit would boost gross domestic product by as much as $1.30 for every dollar spent, and would increase employment by as much as 18 net full-time equivalent jobs for every million dollars invested through the credit, according to the announcement.

Feingold said the tax credit would be offset so as not to increase the deficit.