[Update – American Jobs Act a.k.a 2012 Economic Stimulus] In what is essentially the 2012 stimulus package, President Obama has released details on the American Jobs Act which involves spending over $400 billion dollars to boost economic growth. The key provisions are:
- 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% 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 as they are updated and passed through Congress. You can subscribe (free) via RSS, Email, Facebook or Twitter to get notified of the latest updates.
With the possibility of another global economic slowdown and poll numbers that need a boost, President Obama has committed to providing a blueprint for growth that will spur economic activity and hopefully enable job creation. But many fiscal conservatives and Obama administration detractors are already calling this a 2012 stimulus plan, which will fail like the ones he enacted in 2009 (Recovery act) and 2010 (bush tax cuts and unemployment extension). It is likely that whatever job creation package the Obama administration proposes will contain spending or tax cuts, which Congressional republicans and presidential hopefuls will oppose on ideological and political grounds. This means America needs to get ready for another protracted fight on the hill; just as we witnessed during the debate to raise the debt ceiling.
“I’m going to propose ways to put America back to work that both parties can agree to, because I still believe both parties can work together to solve our problems,” said Obama. “We’re going to see if we’ve got some straight shooters in Congress. We’re going to see if congressional Republicans will put country before party.”
Here are some of the items rumored to be in the proposed jobs plan. Most are just a mix and match of long-time proposals but there will be a few fresh ideas on which bi-partisan support can more likely be garnered.
Tax cuts for companies that hire workers – Following his 2010 proposal for small business‘ to hire workers Obama is likely to renew his push for Congress to extend the “Bonus Deprecation” tax credit which allows a 100% deduction of capital investments in the current year. Businesses of all sizes will be allowed to keep more money now and would give large corporations, many of which are sitting on cash due to uncertainty about the economy, an incentive to spend and invest; thereby spurring economic growth and creating new jobs.
Private-public infrastructure projects where the government will partner (i.e support or finance) companies to build new infrastructure projects like roads, highways and airports. All this new building activity, it is argued, should lead to increased construction and infrastructure related jobs across the nation. This plan is similar to a past (failed) attempt by the administration to create an “infrastructure bank,” which would be run by the government but would pool tax dollars with private investment to focus on paying for national and regional infrastructure projects. Any new proposal will likely include corporate tax reforms as well.
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.
Extend unemployment benefits insurance – With nearly 6 million long term unemployed losing their federal and state unemployment benefits over the next year, the President wants to extend funding for this growing segment of Americans. Unemployment benefits have been increased or extended eight times since 2008 (including 4 times last year) and while it provides the most immediate consumer stimulus, it is also likely to be the most expensive and strongly opposed option out there. Particularly because it does not lead to any new job creation.
Extend payroll tax holiday for workers AND business’ - The payroll tax cut expires at the end of this year and the President will urge Congress to extend this tax break. The 2% payroll tax equates to a $1000 saving for the average American employee. 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.
Re-training credits – With a structural change underway in the types of jobs now available in America, many Americans are simply unemployable with their current skill-set. So the administration will propose tax breaks for individuals that undergo re-training in designated job families to make themselves more employable. Employers that hire these newly trained workers may also get a tax break.
Veteran unemployment benefit programs – These programs were announced earlier and are designed to encourage employers to hire the growing army of veterans, particularly those that have been unemployed for a considerable time. Two new credits – the Returning Heroes Tax Credit and the Wounded Warrior Tax Credit (which extends the Work Opportunity Tax Credit) are being proposed for Congress to legislate on.
The President has indicated that his new jobs plan will be released after labor day and I will provide a detailed update on the new initiatives and programs that are proposed, and more importantly their passage through Congress. You can subscribe (free) via RSS, Email, Facebook or Twitter to get notified of the latest updates.