Post by Tim Collins on Oct 12, 2011 5:44:32 GMT -7
On Facebook and on all the news channels the battle over The President's "Jobs Bill" is raging on in all the rhetorical glory that now comprises our political process. Last week, or perhaps early this week I posted a link to the actual bill (http://www.whitehouse.gov/sites/default/files/omb/legislative/reports/american-jobs-act.pdf) and asked if anyone wanted to read it. Based on the lack of responses I received, and most of the comments about the bill I have read on FB and other forums - I get the feeling few have read it at all. Being the policy wonk that I am, I have read it and decided to write a translation of its contents.
This is part one of that translation.
Enjoy and share with any other policy wonks you may know
Stated Purpose of the Bill
"The purpose of the American Jobs Act of 2011 is simple: put more people back to work and put more money in the pockets of working Americans. And it will do so without adding a dime to the deficit."
Proposed means of achieving the stated purpose
1. Tax Cut and Credits
a. Payroll Tax Cut (estimated at $1,500 per year on average for typical American family)
b. Tax Credit for any business that hires or increases wages
2. Put more people back to work
a. teachers laid off by State budget cuts
b. first responders and veterans coming back from Iraq and Afghanistan
c. construction workers
3. Help out-of-work Americans
a. extending unemployment benefits
b. reforming the system with training programs
c. ban employers from discriminating against the unemployed when hiring
d. provides a new tax credit to employers hiring workers who have been out of a job for over 6 months
e. Creates a new Pathways Back to Work Fund that:
e.1 supports summer and year round jobs for youth
e.2 creates innovative new job training programs to connect low-income workers to jobs quickly
e.3 creates successful programs to encourage employers to bring on disadvantaged workers.
4. This legislation is fully paid for.
a. includes specific offsets to close corporate tax loopholes
b. asks the wealthiest Americans to pay their fair share that more than cover the cost of the jobs measures.
c. The legislation also increases the deficit reduction target for the Joint Committee by the amount of the cost of the jobs package and specifies that, if the Committee reaches that higher target, then their measures would replace and turn off the specific offsets in this legislation
Details of the Bill
TITLE I – RELIEF FOR WORKERS AND BUSINESSES
1. Tax Cuts and Credits
a. Payroll Tax Cut
The term ‘payroll tax holiday period’ means calendar year 2012.
The "payroll tax holiday" applies to private sector employees and employers, and public institutions of higher education (as defined in section 101 of the Higher Education Act of 1965 and employees of said post-secondary educational institutions.
Employers and Employees - This law lowers the tax rate on wages for social security from 6.2% of total wages to 3.1% for the calender year 2012.
Self employed - the reduction is achieved in a different manner that conforms with current tax code for how the original employment tax is calculated.
Revenue and Spending Impact:
Federal Payroll Taxes are collected for dedicated purposes and by law are obliged to be paid to the Federal Old-Age and Survivors Trust Fund, the Federal Disability Insurance Trust Fund and Social Security. In order to meet this legislative requirement this bill mandates amounts equal to the reduction in revenues shall be transferred from the general fund at such times and in such manner as to replicate to the extent possible the transfers which would have occurred to such Trust Fund had such amendments not been enacted. Effectively what had been funded directly from the employed and employers will now be paid from the general fund.
b. Tax Credit for any business that hires or increases wages
If an employer increased his payroll during the period from October 1, 2011 through December 31, 2011, they may take a tax credit of 6.2 percent of the excess (but not more than $12.5 million of the excess) over the wages paid for the corresponding period of 2010.
Example:
Payroll expense 10/1/11 through 12/31/11 - $150,000
Payroll expense 10/1/10 through 12/31/10 - $110,000
Excess Payroll - $40,000
2011 Tax Credit Earned - .062 x $40,000 = $2,480
In the case of a qualified employer for which the wages were zero for the period 10/1/10 through 12/31/10 the amount of such wages shall be deemed to be 80 percent of the amount of wages taken into account for the period from October 1, 2011 through December 31, 2011
Example:
Payroll expense 10/1/11 through 12/31/11 - $150,000
Actual Payroll expense 10/1/10 through 12/31/10 - $0
Deemed Payroll Expenses 10/1/10 through 12/31/10 - $150,000 x 0.80 = $120,000
Deemed Excess Payroll - $150,000 - $120,000 = $30,000
2011 Tax Credit Earned - .062 x $30,000 = $1,860
If during the period from January 1, 2012 through December 31, 2012, an employer increases his payroll they may take a tax credit equal to 6.2 percent of the excess, if any, (but not more than $50 million of the excess) of the wages over such wages for calendar year 2011, minus 3.1 percent of the result (but not less than zero) of subtracting from $5 million such wages for calendar year 2011.
Example:
Payroll expense 01/1/12 through 12/31/12 - $10,000,000
Payroll expense 01/1/11 through 12/31/11 - $ 9,500,000
Gross Excess Payroll - $500,000
Base Excess eligible for Tax Credit - $500,000 - (($9,500,000 - $5,000,000)x.031)) = $500,000 - $139,500 = $360,500
2012 Tax Credit Earned - .062 x $360,500 = $22,351
In the case of a qualified employer for which the wages were zero for the period 01/1/11 through 12/31/11 the amount of such wages shall be deemed to be 80 percent of the amount of wages taken into account for the period from January 1, 2012 through December 31, 2012
Example:
Payroll expense 01/1/12 through 12/31/12 - $10,000,000
Actual Payroll expense 01/1/11 through 12/31/11 - $0
Deemed Payroll Expenses 01/1/11 through 12/31/11 - $10,000,000 x 0.80 = $8,000,000
Deemed Gross Excess Payroll - $10,000,000 - $8,000,000 = $2,000,000
Base Excess eligible for Tax Credit - $500,000 - (($8,000,000 - $5,000,000)x.031)) = $500,000 - $93,000 = $407,000
2012 Tax Credit Earned - .062 x $407,000 = $25,234
SUBTITLE B – OTHER RELIEF FOR BUSINESSES
In all honesty, I am not well versed in the subject matter discussed in the following three additional items in this plan, but present them in the interest of completeness.
SEC. 111. EXTENSION OF TEMPORARY 100 PERCENT BONUS DEPRECIATION FOR CERTAIN BUSINESS ASSETS.
(a) IN GENERAL.—Paragraph (5) of section 168(k) of the Internal Revenue Code is amended—
(1) by striking ‘‘January 1, 2012’’ each place it appears and inserting ‘‘January 1, 2013’’, and
(2) by striking ‘‘January 1, 2013’’ and inserting ‘‘January 1, 2014’’.
(b) CONFORMING AMENDMENT.—The heading for paragraph (5) of section 168(k) of the Internal Revenue Code is amended by striking ‘‘PRE-2012 PERIODS’’ and inserting ‘‘PRE-2013 PERIODS’’.
Comment: I believe this is intended to extend the period during which a company may take a full deduction from income for the purchase of qualified assets required to perform their business. Normally when a company makes a major asset purchase, for example a printer buying a large press, they deduct only a portion of that cost in the year it was purchased and the remainder is deducted in subsequent years,typically over a 7 year period if I remember correctly.
The result is to reduce their tax liability. This provision (assuming I am correct) would allow a company that purchases an allowable asset (equipment) to take the full cost of the asset as a deduction in the year of the purchase, thus an immediate reduction to tax liability.
SEC. 112. SURETY BONDS.
(a) MAXIMUM BOND AMOUNT.— Section 411(a)(1) of the Small Business Investment Act of 1958 (15 U.S.C. 694b(a)(1)) is amended by striking ‘‘$2,000,000’’ and inserting ‘‘$5,000,000”.
(b) DENIAL OF LIABILITY.— Section 411(e)(2) of the Small Business Investment Act of 1958 (15 U.S.C. 694b(e)(2)) is amended by striking ‘‘$2,000,000’’ and inserting ‘‘$5,000,000”.
(c) SUNSET.— The amendments made by subsections (a) and (b) of this section shall remain in effect until September 30, 2012.
(d) FUNDING. — There is appropriated out of any money in the Treasury not otherwise appropriated, $3,000,000, to remain available until expended, for additional capital for the Surety Bond Guarantees Revolving Fund, as authorized by the Small Business Investment Act of 1958, as amended.
Comment: I have no idea what this means, but note there is a cost to the Treasury of $3,000,000 to implement/fund this proposal.
SEC. 113. DELAY IN APPLICATION OF WITHHOLDING ON GOVERNMENT CONTRACTORS.
Subsection (b) of section 511 of the Tax Increase Prevention and Reconciliation Act of 2005 is amended by striking “December 31, 2011” and inserting “December 31, 2013”.
Comment: Again I do not have any idea what this is or does.
This is part one of that translation.
Enjoy and share with any other policy wonks you may know
Stated Purpose of the Bill
"The purpose of the American Jobs Act of 2011 is simple: put more people back to work and put more money in the pockets of working Americans. And it will do so without adding a dime to the deficit."
Proposed means of achieving the stated purpose
1. Tax Cut and Credits
a. Payroll Tax Cut (estimated at $1,500 per year on average for typical American family)
b. Tax Credit for any business that hires or increases wages
2. Put more people back to work
a. teachers laid off by State budget cuts
b. first responders and veterans coming back from Iraq and Afghanistan
c. construction workers
3. Help out-of-work Americans
a. extending unemployment benefits
b. reforming the system with training programs
c. ban employers from discriminating against the unemployed when hiring
d. provides a new tax credit to employers hiring workers who have been out of a job for over 6 months
e. Creates a new Pathways Back to Work Fund that:
e.1 supports summer and year round jobs for youth
e.2 creates innovative new job training programs to connect low-income workers to jobs quickly
e.3 creates successful programs to encourage employers to bring on disadvantaged workers.
4. This legislation is fully paid for.
a. includes specific offsets to close corporate tax loopholes
b. asks the wealthiest Americans to pay their fair share that more than cover the cost of the jobs measures.
c. The legislation also increases the deficit reduction target for the Joint Committee by the amount of the cost of the jobs package and specifies that, if the Committee reaches that higher target, then their measures would replace and turn off the specific offsets in this legislation
Details of the Bill
TITLE I – RELIEF FOR WORKERS AND BUSINESSES
1. Tax Cuts and Credits
a. Payroll Tax Cut
The term ‘payroll tax holiday period’ means calendar year 2012.
The "payroll tax holiday" applies to private sector employees and employers, and public institutions of higher education (as defined in section 101 of the Higher Education Act of 1965 and employees of said post-secondary educational institutions.
Employers and Employees - This law lowers the tax rate on wages for social security from 6.2% of total wages to 3.1% for the calender year 2012.
Self employed - the reduction is achieved in a different manner that conforms with current tax code for how the original employment tax is calculated.
Revenue and Spending Impact:
Federal Payroll Taxes are collected for dedicated purposes and by law are obliged to be paid to the Federal Old-Age and Survivors Trust Fund, the Federal Disability Insurance Trust Fund and Social Security. In order to meet this legislative requirement this bill mandates amounts equal to the reduction in revenues shall be transferred from the general fund at such times and in such manner as to replicate to the extent possible the transfers which would have occurred to such Trust Fund had such amendments not been enacted. Effectively what had been funded directly from the employed and employers will now be paid from the general fund.
b. Tax Credit for any business that hires or increases wages
If an employer increased his payroll during the period from October 1, 2011 through December 31, 2011, they may take a tax credit of 6.2 percent of the excess (but not more than $12.5 million of the excess) over the wages paid for the corresponding period of 2010.
Example:
Payroll expense 10/1/11 through 12/31/11 - $150,000
Payroll expense 10/1/10 through 12/31/10 - $110,000
Excess Payroll - $40,000
2011 Tax Credit Earned - .062 x $40,000 = $2,480
In the case of a qualified employer for which the wages were zero for the period 10/1/10 through 12/31/10 the amount of such wages shall be deemed to be 80 percent of the amount of wages taken into account for the period from October 1, 2011 through December 31, 2011
Example:
Payroll expense 10/1/11 through 12/31/11 - $150,000
Actual Payroll expense 10/1/10 through 12/31/10 - $0
Deemed Payroll Expenses 10/1/10 through 12/31/10 - $150,000 x 0.80 = $120,000
Deemed Excess Payroll - $150,000 - $120,000 = $30,000
2011 Tax Credit Earned - .062 x $30,000 = $1,860
If during the period from January 1, 2012 through December 31, 2012, an employer increases his payroll they may take a tax credit equal to 6.2 percent of the excess, if any, (but not more than $50 million of the excess) of the wages over such wages for calendar year 2011, minus 3.1 percent of the result (but not less than zero) of subtracting from $5 million such wages for calendar year 2011.
Example:
Payroll expense 01/1/12 through 12/31/12 - $10,000,000
Payroll expense 01/1/11 through 12/31/11 - $ 9,500,000
Gross Excess Payroll - $500,000
Base Excess eligible for Tax Credit - $500,000 - (($9,500,000 - $5,000,000)x.031)) = $500,000 - $139,500 = $360,500
2012 Tax Credit Earned - .062 x $360,500 = $22,351
In the case of a qualified employer for which the wages were zero for the period 01/1/11 through 12/31/11 the amount of such wages shall be deemed to be 80 percent of the amount of wages taken into account for the period from January 1, 2012 through December 31, 2012
Example:
Payroll expense 01/1/12 through 12/31/12 - $10,000,000
Actual Payroll expense 01/1/11 through 12/31/11 - $0
Deemed Payroll Expenses 01/1/11 through 12/31/11 - $10,000,000 x 0.80 = $8,000,000
Deemed Gross Excess Payroll - $10,000,000 - $8,000,000 = $2,000,000
Base Excess eligible for Tax Credit - $500,000 - (($8,000,000 - $5,000,000)x.031)) = $500,000 - $93,000 = $407,000
2012 Tax Credit Earned - .062 x $407,000 = $25,234
SUBTITLE B – OTHER RELIEF FOR BUSINESSES
In all honesty, I am not well versed in the subject matter discussed in the following three additional items in this plan, but present them in the interest of completeness.
SEC. 111. EXTENSION OF TEMPORARY 100 PERCENT BONUS DEPRECIATION FOR CERTAIN BUSINESS ASSETS.
(a) IN GENERAL.—Paragraph (5) of section 168(k) of the Internal Revenue Code is amended—
(1) by striking ‘‘January 1, 2012’’ each place it appears and inserting ‘‘January 1, 2013’’, and
(2) by striking ‘‘January 1, 2013’’ and inserting ‘‘January 1, 2014’’.
(b) CONFORMING AMENDMENT.—The heading for paragraph (5) of section 168(k) of the Internal Revenue Code is amended by striking ‘‘PRE-2012 PERIODS’’ and inserting ‘‘PRE-2013 PERIODS’’.
Comment: I believe this is intended to extend the period during which a company may take a full deduction from income for the purchase of qualified assets required to perform their business. Normally when a company makes a major asset purchase, for example a printer buying a large press, they deduct only a portion of that cost in the year it was purchased and the remainder is deducted in subsequent years,typically over a 7 year period if I remember correctly.
The result is to reduce their tax liability. This provision (assuming I am correct) would allow a company that purchases an allowable asset (equipment) to take the full cost of the asset as a deduction in the year of the purchase, thus an immediate reduction to tax liability.
SEC. 112. SURETY BONDS.
(a) MAXIMUM BOND AMOUNT.— Section 411(a)(1) of the Small Business Investment Act of 1958 (15 U.S.C. 694b(a)(1)) is amended by striking ‘‘$2,000,000’’ and inserting ‘‘$5,000,000”.
(b) DENIAL OF LIABILITY.— Section 411(e)(2) of the Small Business Investment Act of 1958 (15 U.S.C. 694b(e)(2)) is amended by striking ‘‘$2,000,000’’ and inserting ‘‘$5,000,000”.
(c) SUNSET.— The amendments made by subsections (a) and (b) of this section shall remain in effect until September 30, 2012.
(d) FUNDING. — There is appropriated out of any money in the Treasury not otherwise appropriated, $3,000,000, to remain available until expended, for additional capital for the Surety Bond Guarantees Revolving Fund, as authorized by the Small Business Investment Act of 1958, as amended.
Comment: I have no idea what this means, but note there is a cost to the Treasury of $3,000,000 to implement/fund this proposal.
SEC. 113. DELAY IN APPLICATION OF WITHHOLDING ON GOVERNMENT CONTRACTORS.
Subsection (b) of section 511 of the Tax Increase Prevention and Reconciliation Act of 2005 is amended by striking “December 31, 2011” and inserting “December 31, 2013”.
Comment: Again I do not have any idea what this is or does.