Incentives Watch: How Do States Encourage Small Businesses to Hire Workers?
The U.S. unemployment rate has been relatively low for close to six months, with the average rate hovering at 4.1 percent. However, Bureau of Labor Statistics data shows that some groups have higher rates of unemployment than others. Additionally, some states have higher than the average unemployment rates, while others are well under the average rate. Hawaii has the lowest unemployment rate at 2.1 percent, and Alaska’s 7.3 percent is the highest. Four states are right at the 4.1 percent average: Kentucky, Montana, Oklahoma, and Oregon. The Small Business and Entrepreneurship Council estimates that U.S. firms with less than 20 workers account for over 89 percent of businesses.
How are some states encouraging small employers to increase employment opportunities? Here’s a round-up.
Alabama offers three credits for small businesses. The Full Employment Credit allows firms with 50 or fewer employees that create new jobs paying more than $10 an hour to take a credit of $1,000 when the new employee completes 12 months of consecutive employment. There are also credits for hiring a recently deployed unemployed veteran and for creating new jobs.
Small employers in Idaho can take a credit for creating new jobs. Employers must make capital investments of at least $500,000 in new facilities and increase employment by a minimum of 10 employees earning at least $19.23 and benefits. If the number of new employees increases to over 10, the average wage can be $15.50. An additional credit is available to small employers that invest in new plants and buildings.
Small businesses with up to 20 employees may qualify for the Maine Wellness Programs Credit. Qualified programs include health education programs; behavioral change programs, such as nutrition, stress management, or smoking cessation counseling or seminars; and employee incentive awards for engaging in regular physical activity.
Maryland small business employers can qualify for a tax credit when hiring veterans. The Hire Our Veterans tax credit is 30 percent of the first $6,000 of wages the firm pays qualified veterans during their first year of employment (maximum of $1,800 per employee). To be qualified, the veteran must have been hired on or after Jan. 1, 2017, among other qualifications.
In Missouri, small businesses are eligible for the disabled access tax credit if their gross receipts do not exceed $1 million or they did not employ more than 30 full-time employees. If the business had expenditures that exceed the $10,250 federal credit limit, the business can take a state income tax credit of up to 50 percent of eligible expenditures, up to $5,000 a year.
Beginning in 2018, Montana employers may apply for a tax credit for new positions that offer the worker on-the-job training. The Apprenticeship Tax Credit equals $750 for each apprentice ($1,500 if they are veterans). Taxpayers must seek approval from the Department of Labor and Industry to claim the credit.
Utah offers a credit to employers who hire a homeless person. The employer must certify that the hired person meets the definition of homeless and that the employer paid at least $4,000 in wages during two calendar quarters in which the hire occurred.
Any qualified business creating fewer than 20 new jobs for a regular business and fewer than 10 jobs for a qualified small business is eligible for a tax credit of $3,000 annually for five years for each job created. Qualified businesses are businesses engaged in manufacturing, information processing, warehousing, non-retail goods distribution, qualified research and development, or destination-oriented recreation and tourism.
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