Last week President Obama called on Congress to pass a package of proposal he referred to as the “American Jobs Act.” The text of the bill has just been made available (PDF version). A summary has also been provided (PDF here).
TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. components include:
- Section 101: Extends the existing payroll taxA payroll tax is a tax paid on the wages and salaries of employees to finance social insurance programs like Social Security, Medicare, and unemployment insurance. Payroll taxes are social insurance taxes that comprise 24.8 percent of combined federal, state, and local government revenue, the second largest source of that combined tax revenue. cut for another year and reduces it further. In 2010, employees and employers each paid 7.65 percent of an employee’s payroll. This year, employers pay 7.65 percent and employees pay 5.65 percent. The proposal would, for 2012 only, reduce the rates further to 4.55 percent both for employers and employees.
- Section 102: Provides a tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. for employer payroll taxes owed for new hires or increased wages for 2012, up to a $50 million cap per employer.
- Section 111: Extends bonus depreciationBonus depreciation allows firms to deduct a larger portion of certain “short-lived” investments in new or improved technology, equipment, or buildings, in the first year. Allowing businesses to write off more investments partially alleviates a bias in the tax code and incentivizes companies to invest more, which, in the long run, raises worker productivity, boosts wages, and creates more jobs. for certain property through the end of 2012.
- Section 201: Tax credits for hiring veterans: Doubles the tax credit for hiring unemployed disabled veterans, from $4,800 to $9,600. Additional tax credits are created ($2,400 for hiring a veteran unemployed for at least 4 weeks; $5,600 for hiring a veteran unemployed for at least 6 months).
- Section 351: Tax credit for long-term unemployed: $4,000 tax credit to employers who hire someone who has been unemployed for at least 6 months.
- Section 401: Limits the ability of high-income taxpayers to take deductions, by reducing their value to a maximum 28 percent. (If a high-income taxpayer is in the 35 percent bracket, they can currently deduct charitable contributions, for example, at the 35 percent rate. This would reduce that deduction to 28 percent.)
- Section 411-412: Taxes certain partnership income as ordinary income instead of as a capital gain. More on that issue here.
- Section 421: Repeals the bonus depreciationDepreciation is a measurement of the “useful life” of a business asset, such as machinery or a factory, to determine the multiyear period over which the cost of that asset can be deducted from taxable income. Instead of allowing businesses to deduct the cost of investments immediately (i.e., full expensing), depreciation requires deductions to be taken over time, reducing their value and discouraging investment. deduction to those purchasing corporate jets, a provision enacted as part of the 2009 stimulus law.
- Section 431-442: Disallowal of a number of deductions for the oil and gas industry. We’ve previously written on why the foreign tax credit and the Section 199 deduction should not be considered “oil company loopholes.”
- Section 451: Increases the deficit target of the “super committee” to $1.95 trillion (up from $1.5 trillion).
The Hill reports that the tax increases in the bill total over $400 billion.
Additionally, the bill provides $88 billion in state and local aid, $2 billion for Amtrak, $5 billion for subsidized jobs for the low-income unemployed and youth, and sets up an “Infrastructure Bank” with $10 billion in initial funding.
Unemployment benefits would be extended another year under the bill, to early 2013. The bill also prohibits employers from discriminating against individuals for being unemployed, authorizing the Equal Employment Opportunity Commission (EEOC) to hear such discrimination complaints.Share