[Update Sep 2011] – President Obama has revealed details on his new $447 billion Americans Jobs Act and it is pretty much in line with what I had referenced in my earlier update (see below) before his speech. Here are the main things he is proposing that now go to Congress for review and approval:
- Extension of employee payroll tax cuts into 2012, which were due to expire this year, covering the first $106,800 in earnings. The proposal seeks to reduce the portion paid by employees in 2012 to 3.1% from 6.2%. The rate had been cut by 2% in 2011, under the bush tax cuts extension deal, and the increased extension in 2012 will provide about $1500 more in savings for the average family.
- The jobs plan also includes incentives for new hiring by small businesses via payroll social security tax exclusions. Businesses would get the same 3.1-point reduction on payroll taxes as employees for the first $5 million of their payroll. The full 6.2 percent employer contribution would be waived on the first $50 million net increase in a company’s payroll.
- Spending $140 billion on infrastructure projects such as school modernization efforts, transportation projects and rehabilitation of vacant properties. More specifically $25 billion will go towards refurbishing at least 35,000 schools in 2012 and 2012, with an additional $5 billion going toward community colleges. These funds will be managed via a National Infrastructure Bank.
- 2012 Unemployment Benefits Extension - The President has called for more than $62 billion in spending to extend unemployment insurance benefits through 2012. He is also looking to fund state administered programs that will alleviate long-term joblessness millions of Americans. The proposals will also provide up to $4,000 in tax credit benefits for business’ that train people who have been out of work for 6 or more months, by covering costs to the employer for up to 8 weeks. States will also be able to use unemployment-insurance funds to make up for wages lost by workers whose hours were cut back in lieu of a layoff and for those 50 and older who took a lower-paying job after a layoff.
- Veteran employment tax credits: The proposal includes additional tax credits (Returning Heroes and Wounded Warrior tax credits) for hiring veterans and workers who have been unemployed more than six months. The value to these these tax credits to business’ hiring veterans ranges from $5,600 to $9,600.
- Small business will also continue to receive the benefits of accelerated depreciation via 100% expensing for new investments.
- Refinance to lower rates. Through the FHA and Government owned entities, Fannie Mae and Freddie Mac, struggling home owners will be able to refinance their mortgages to the sub-4% rates available today. A one percent interest decrease can put more than $2,000 a year in an average family’s pocket.
I will provide a detailed update on the new initiatives and programs that are proposed, and more importantly their passage through Congress. If you found the above information useful, consider subscribing (free) via RSS, Email, Facebook or Twitter to get notified of the latest updates.
[Possible Jobs Plan Initiatives] President Obama is scheduled to speak shortly on his new jobs and economic recovery package aimed at helping millions of struggling Americans and small business’. His latest proposal aims to spur job growth by injecting more than $300 billion into the economy next year, mostly through tax cuts, infrastructure spending and direct aid to state and local governments. This includes:
- Continuation of the current payroll tax cut. The cut, which cost $112 billion so far, allows employees to pay 4.2% instead of 6.2% on their first $106,800 of wages into Social Security. The president will also push to get the payroll tax (which is also paid by employers) suspended for small business’ and/or those that commit to hiring new workers.
- Another extension of unemployment benefits, which were lengthened to the current 99-week maximum in 2009. The 13-month extension came with a price tag of $56.5 billion, though top Democrats argue that such money is immediately pumped back into the economy. To address the problem of long-term unemployment, Obama will likely propose a national program, modeled after a Georgia initiative that allows workers who receive unemployment insurance to train for jobs at businesses at no cost to the employer.
- Funding for local governments to reduce layoffs of teachers and first responders. Education and re-training will be a key theme in Obama’s job plan, and he will also propose as part of his infrastructure program money for school construction. Some of the infrastructure spending would go toward roads, bridges and other surface transportation projects.
- Mortgage relief for struggling homeowners - The President’s plan is also likely to push for more or extended government sponsored housing relief programs where eligible homeowners can refinance to lower rates despite not having a job or strong credit history. This program is aimed at stabilizing the housing market and industry, which is one of the largest employers in the nation.
These short-term jobs measures will likely be funded by raising tax revenue in later years. This would be part of a long-term deficit reduction package, including spending and entitlement cuts as well as revenue increases, that he will present next week to the congressional panel charged with finding ways to reduce the nation’s debt.
Sources : Bloomberg, The WhiteHouse