President Obama sent his jobs bill to Congress with $467 billion in tax code changes that he proposes to pay for the measure, even though lawmakers from both parties have previously rejected those same changes.
The American Jobs Act of 2011 would:
- Halve the taxes paid by businesses on their first $5 million of payroll
- Completely eliminate payroll taxes for new hires
- Provide funds to prevent teacher layoffs
- Extend unemployment insurance
- Extend and expand the payroll tax cut for workers
Tax specifics of the proposal include:
Reducing payroll taxes
Last year, a reduction in the employee portion of Social Security taxes from 6.2% to 4.2% was implemented for 2011. The American Jobs Act proposes extending this tax break through 2012, and reducing the employee’s portion again to 3.1%. A similar reduction would likely apply to self-employment taxes.
Reducing or eliminating Social Security taxes for employers
The employer’s share of Social Security taxes would also be reduced to 3.1% for the first $5 million in wages. This translates to a potential benefit of $155,000 for the employer. In addition, there would be a complete elimination of the employer’s portion of the Social Security tax – from 6.2% to zero – on the amount of payroll that represents an increase from the prior year, up to a $50 million cap.
Tax credits for hiring
The tax credits proposed are:
- Workers who have been unemployed for at least six months – $4,000
- Veterans who have been unemployed for at least six months – $5,600
- Veterans with disabilities – $9,600
To pay for these provisions, President Obama rolled out a host of offsets that have previously failed to pass muster with Congress, including a tax hike on carried interest and a curb on the rate that high-income taxpayers use to itemize tax deductions.
House Republican leaders rejected the offsets before they were officially released, noting that they have been rejected in the past – including when Obama advocated for them when Democrats controlled both the House and the Senate.
In a statement, House Speaker John Boehner, R-Ohio, said that even though Republicans have a “different vision” for job growth, he would immediately ask the Congressional Budget Office to score the president's bill.
Gov. Kasich has said he supports the proposal to extend payroll tax deductions.