|September 21, 2011|
Previously published on September 15, 2011
On Thursday, September 8th, President Obama addressed a joint session of Congress to outline his plan for job creation. “The American Jobs Act” has 5 key components, including:
- "Tax cuts to help America’s small businesses hire and grow"
- "Putting workers back on the job while rebuilding and modernizing America"
- "Pathways back to work for Americans looking for jobs"
- "More money in the pockets of every American worker and family"
- "Fully paid for as part of the President’s long-term deficit reduction plan"
1. Tax cuts to help America’s small businesses hire and grow
“The American Jobs Act” includes immediate incentives for businesses to hire and invest for the future. These incentives are especially geared towards small businesses, but are applicable to all business. The President proposes cutting the payroll tax cut in half for 98% of businesses, by cutting taxes on the first $5 million in payroll. The plan also calls for the elimination of payroll taxes for companies that increase their payroll by either hiring new workers or increasing wages of current employees. The 100% business expensing provision that was passed in December 2010 will be extended through 2012. Additionally, the plan contains administrative, regulatory, and legislative measures to spur growth and expansion of small businesses.
2. Putting workers back on the job while rebuilding and modernizing America
The President’s plan includes hiring incentives in conjunction with infrastructure projects. The “Returning Heroes” hiring tax credit provides $5,600-$9,600 as an incentive to hire unemployed veterans. $5 billion is included to support the hiring and retention of first responders and public safety workers. The plan involves upfront investments to modernize at least 35,000 public schools and the nation’s infrastructure. Federal resources for infrastructure will be directed to projects with the most merit through the bipartisan National Infrastructure Bank. Job creation measures extend to “Project Rebuild,” which will enable people to rehabilitate homes, businesses, and communities through public-private funding initiatives. There is also a provision in the plan that details a nationwide expansion of wireless internet services, giving access to 98% of Americans.
3. Pathways back to work for Americans looking for jobs
“The American Jobs Act” contains reforms to the unemployment insurance program. Modifications include work-sharing versus layoffs, a new “Bridge to Work” program, and entrepreneurship and wage insurance programs. In addition to changes in unemployment insurance, a $4,000 tax credit would be offered to employers for hiring long-term unemployed workers. Employers would also be prohibited from discriminating against unemployed workers when hiring. The plan calls for investments to be made to expand job opportunities for low-income youth and adults through support of summer jobs programs, wage-subsidized employment, and innovative training programs.
4. More money in the pockets of every American worker and family
The President’s plan will cut payroll taxes in half in 2012, providing tax relief to 160 million workers. By expanding on the tax cut that was enacted in December 2010, workers will pay only 3.1% in Social Security taxes rather than 6.2%. As with the December 2010 tax cut, “The American Jobs Act” will specify that Social Security will still receive every dollar it would have otherwise received through allocations from the General Fund. Furthermore, with interest rates hovering around 4%, the plan allows for more Americans to refinance their mortgages.
5. Fully paid for as part of the President’s long-term deficit reduction plan
To pay for the initiatives laid out in his plan, the President will call on the newly-formed Joint Committee for deficit reduction to find additional cuts. A supplementary plan will be released in the coming days to show how “The American Jobs Act” will be funded while achieving deficit reduction necessary to meet the President’s broader goal of stabilizing the nation’s debt.
We are anticipating the details of the Republican jobs plan to be issued in the coming days. Speaker John Boehner is expected to address “The American Jobs Act” in his speech to the Economic Club of Washington today. Republicans have voiced concerns about the payroll tax cut extension and the revenue changes outlined in the President’s plan. Rather than payroll tax cuts, Republican House members have called for lowering income tax rates and eliminating tax preferences as permanent solutions to overhaul the nation’s tax system. The Ways and Means Committee Republicans are scheduled to meet today to discuss their jobs agenda; they should release information within the next few weeks.