The proposal, which Obama mentioned in his State of the Union speech Wednesday night, is an updated version of an initiative that was first considered as a part of the 2009 stimulus package and later abandoned.
A senior White House official, briefing reporters on condition he not be identified by name because Obama had not yet made the details public, said the time was ripe for the idea. The tax subsidy is designed to reward businesses for hiring new workers and giving raises or more hours of work to existing employees.
"A year ago, the economy was in free-fall," and businesses were planning to lay off workers, the official said. "Now, there are a lot of businesses that are poised" to add workers. "If they're a little bit nervous about hiring somebody today, rather than waiting another six months, this is about telling them: Hire today."
The plan, which the official compared to the "Cash for Clunkers" auto stimulus, is designed to spur immediate hiring and would require approval by Congress. As outlined by the administration, a business would receive a tax credit of up to $5,000 for every new employee added to its work force this year.
Obama is giving the subsidy a politically attractive title - the Small Business Jobs and Wages Tax Cut - and the administration expects it to cut taxes for more than one million small businesses. But the benefit would be available to any business, regardless of size.
Because it would be capped at $500,000 per company and because there are far more small employers than large ones, officials explained, small businesses would receive most of the benefits.
The administration has no estimate on the number of jobs that could be created as a result, or how many employers would get a tax break for jobs that they would have added anyway.
"Every single policy to help create jobs will involve a certain amount of rewarding people who are already creating jobs," said the official. "The president thinks that's a good thing, and he's happy to do that."
With unemployment expected to remain at or near 10 percent throughout 2010, Obama is putting jobs at the center of his election-year agenda.
The tax package he'll announce in Baltimore would provide an additional 6.2 percent bonus subsidy to businesses that increase hours or wages for existing employees. It would come in the form of a reimbursement of the Social Security payroll tax and would not apply to increases above the taxable maximum of $106,800.
Companies could claim the credit on a quarterly basis, a provision designed to get them money quickly and provide an early incentive to boost payrolls, officials said. The benefit is designed to be retroactive to Jan. 1 and would expire at the end of the year.
Start-up businesses would be eligible for half of the credit and nonprofit groups could also qualify. The benefit would not apply to government hiring.
Obama will announce the plan after touring a local business, then head to the Inner Harbor where he'll meet with House Republicans, who are holding a three-day retreat in the city.
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