The Locker Room

Tax gimmicks in the House

Posted by Joseph Coletti at 10:52 AM

Just learned some details on one proposal (House Bill 1721, the H.E.L.P. Small Business Act - never trust a bill with a cute acronym)* to turn the governor's gimmick of tax credits for small business that hire people. These make it clear that any business that hires somebody based on the tax credit shouldn't be in business.

Your business would have to show your average number of full-time employees the year before you hire someone, then show the average number of full-time employees the year you do the hiring to qualify for a $1,000 tax credit per new job.

You then have to keep that job for three years. So the tax credit works out to $333 per year based on your faith in the economy to keep a person on staff for three full years. If you downsize at any point in the next three years, you have to repay the tax credit (just like Dell). You might be able to fire other people, just not the person you hired for to qualify for the tax credit.

It's also not clear how long a person has to be on staff and whether the average number of employees has to rise by at least 0.5 to qualify for the tax credit. On the other side, if you hired someone on January 1 and you plan to get the tax credit, then another employee moves, you still might not qualify for the credit.

Your small company will have to do all of this reporting, then lose all of your privacy as a firm because the Commerce Department will publish a report detailing credits claimed "itemized by taxpayer." Other statutory tax credits are aggregated so we don't see who gets them. This may make sense from a transparency side, but is another cost for the small business.

One more time now. If you want businesses to grow and hire people, really reduce government spending to a sustainable level and provide a better tax climate. Micromanaging small businesses from the legislature is not the way.

* Added bill information and link.

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