How a Payroll-Tax Holiday Affects Small Businesses

What matters for business owners in Obama’s new jobs bill.


Michael Ettlinger, vice president for economic policy at the Center for American Progress, argues that while a tax break might not persuade most businesses to take on new employees, some will be right on the edge of being able to afford to hire a new person. The jobs bill will provide that extra push to make hiring possible. But "that's only going to be at the margins. There will be very few businesses that are right at that tipping point," he says.

The businesses at that tipping point might be more likely to be smaller firms with a handful of employees, as opposed to larger corporations. "I would expect small employers to be more likely to be affected by this because of their flexibility," says Ettlinger. Small businesses can easily recognize their basic hiring abilities. "In the case of a large employer, they have a longer planning horizon on expanding employment. They don't expand or contract their workforce as quickly," says Ettlinger.

But these small businesses on the margins will not be the typical companies that benefit from the jobs bill. Instead, businesses that are already capitalized enough to hire—and would have done so this year anyway—will get an extra windfall. "There are millions of jobs being lost and created every month," says Ettlinger. "As a matter of basic arithmetic, most of the money will go to hires that would have happened anyway."

small business