Institute for Economic Empowerment

In June 2009, the Institute contracted with Mathematica Policy Research to explore the use of an employer payroll tax credit to provide employers with stronger incentives to hire people with disabilities.

Mathematica developed a preliminary model of a budget-neutral employer payroll tax credit, estimating the potential cost savings to the Federal government of companies employing people with disabilities.

Features of the Employer Payroll Tax Incentive

Based on the findings of the preliminary model, the employer payroll tax incentive specified has the following features:

• Target population:  Employed SSI and DI beneficiaries and former beneficiaries with earnings greater than $1000 per month.
  
• Tax Credit:  Employers with at least 1% of their employees meeting these criteria will be eligible for a FICA credit for each employee in the target population. The amount of the credit will vary based on whether or not the employee is covered by a health insurance plan offered by the employer.
• Limit:  An employer's total aggregate tax credit may not exceed 7.65% of payroll (the employer's share of the FICA tax).
  

During Phase 2, Mathematica will conduct field research to further refine the model and develop approaches to policy intervention. In Phase 3, a demonstration and evaluation of the tax incentive will be conducted, with the goal of generating rigorous empirical evidence that a well-designed, budget-neutral policy intervention could increase the employment of people with disabilities.