By Nancy Faussett, CPA
Publication Date: 10/12/2011
Yesterday the Senate held a procedural vote on whether or not to allow the
American Jobs Act of 2011 (S. 1660) to move forward. The vote, which needed 60
Senators, failed, leaving the Democrats searching for new ways to advance the
President's ideas. However, while it’s been mentioned in the news a lot, few of
us know its actual contents. What we do know is there has been a lot of
disagreement on whether it will create the much needed jobs its supporters say
it will. So, let’s take a look at the chief provisions of this bill and you can
decide for yourself. Besides the hope that it will create jobs, it also was
written with the goals of tax relief and help for the unemployed (both
financial and an attempt to eliminate the current bias against those who have
been unemployed for a long period of time). There are four principle areas in
the Act:
- Tax relief for both workers
and businesses, - Creating jobs while rebuilding
and modernizing America, - Assistance for the
unemployed and providing pathways back to work, and - Offsets to pay for its
provisions.
Tax Relief There is tax relief for both workers and employers included in the Act:
- Payroll taxes:
The Act extends and expands the temporary reduction in payroll taxes.
Currently employees are enjoying a 2% reduction in social security taxes
but the Act would reduce it yet another 1.1% for 2012. Furthermore, there
is a new reduction in the social security tax paid by employers, reducing
it from 6.2% to 3.1%. The latter applies to up to $5 million of wages paid
by the employer but does not apply to either government employers or to
household workers. Similar reductions are given to self-employed
individuals. - Payroll tax credit
for employers increasing wages: The Act introduces a new
temporary tax credit for employers who increase their payroll. The credit
is computed for the last quarter of 2011 and for all of 2012. For the
credit to apply, the payroll must increase from the corresponding period
of the prior year. The credit fully offsets the employer social security
tax on up to $50 million of the increased wage amount. - Bonus depreciation:
The Act extends the 100% bonus deduction for qualifying property placed in
service in 2012.- Surety bonds:
The Act temporarily increases the size of contract surety bond that the
Small Business Administration can guarantee from $2 million to $5 million. - Withholding on
government contractors: The Act delays the effective date,
through 2013, for the required withholding by government agencies of 3% on
payments to individuals providing certain services or property.
Job Creation The Act creates jobs to rebuild and modernize America:
- Tax credits for
hiring veterans: Currently, there is a Work Opportunity Credit
for employers who hire veterans who have been unemployed for at least 6
months and have service-related disability, for up to $4,800. The Act
increases the credit to $9,600 and creates 2 new credits for hiring
veterans: 1> $2,400 for hiring veterans who have been unemployed for at
least 4 weeks, and 2> $5,600 for hiring veterans who have been
unemployed for at least 6 months. - Teacher
stabilization: To prevent layoffs and increase jobs for public
school teachers, the Act authorizes state grants, for fiscal year 2012
(ending September 30, 2012), totaling $30 billion. This provision is
intended to assist teachers working in early childhood, elementary, and
secondary education. - First responder
stabilization: To prevent layoffs and increase jobs for law
enforcement officers and other first responders, the Act authorizes, for
fiscal year 2012, $5 billion. - School
modernization: For elementary and secondary schools, the Act
authorizes, for fiscal year 2012, $25 billion. This is for modernization,
renovation, and repair to public school buildings in order to improve the
educational outcomes. Another $5 billion is authorized for community
colleges. - Immediate
transportation infrastructure investments: The Act authorizes $2
billion for airport development grants, $1 billion to improve FAA air
navigation facilities, $27 billion for highway restoration and
construction (to include passenger and freight rail projects), $4 billion
to improve intercity passenger rail and develop new high speed rail, $2
billion to Amtrak for repairs, $3 billion for transit capital projects, $6
billion to modernize existing fixed guideway systems and improve buses and
facilities, and $5 billion for surface transportation projects. - Building and
upgrading infrastructure for long-term development (BUILD Act):
The Build Act creates an institution to encourage significant private
investment in viable qualifying infrastructure projects to both create
jobs and to “ensure U.S.
competitiveness through an institution that limits the need for ongoing
Federal funding.” - Project Rebuild: The
Act authorizes $15 billion for construction workers to rehabilitate and
refurbish foreclosed homes and businesses. The idea is to both create jobs
and to stabilize neighborhoods with high numbers of foreclosures, thereby
increasing or at least stabilizing property values. - National wireless
initiative: The Act clarifies the authorities to repurpose the
Spectrum Relocation Fund (SRF) for commercial purposes. The Act allows
federal agencies to be reimbursed for the costs of accommodating
additional non-federal access to their frequencies. It also covers the
costs for studies of sharing bands among federal users.
Assistance for Unemployed and Pathways Back to Work This part of the Act is entitled the Supporting Unemployed Workers Act of
2011. It includes:
- Support for
unemployed workers: The Act extends the emergency unemployment
compensation (EUC) program for individuals to enter the program, by one
year, to January 3, 2013, and allows the EUC accounts to distribute their
balances until June 8, 2013. The Act also establishes requirements for
state to provide reemployment services, authorizing $200 for each
qualifying individual. In addition the Act extends unemployment benefits
under the Railroad Unemployment Insurance Act, through 2012. - Establishes the
Reemployment NOW program: The Act authorizes $4 billion, for
fiscal year 2012, to facilitate the reemployment of individuals receiving
emergency unemployment compensation and to establish a bridge-to-work
program. This program would allow eligible individuals to engage in
temporary short-term work assignments and possibly receive augmented wages
to supplement their EUC payments. - Long-term
unemployed hiring preferences: The Act allows the Work
Opportunity Credit for employers who hire individuals who have been
unemployed for at least 6 months, for up to $4,000. - Pathways Back to
Work Act of 2011: The Act establishes a $5 billion fund to
support subsidized employment opportunities, summer and year-round youth
employment, and work-based training programs for unemployed, low-income
adults and youth. The funds would be available for obligation through 2012
and for distribution through September 30, 2013. - Prohibits
discrimination in employment on the basis of someone’s status as
unemployed: This provision is called the Fair Employment
Opportunity Act of 2011. This will be under the purview of the Equal
Employment Opportunity Commission.
