In mid-September, President Obama unveiled an aggressive jobs plan to the nation. Titled the “American Jobs Act of 2011,” this bill contains provisions that tackle unemployment woes to infrastructure investments.
What’s in Obama’s New Jobs Plan?
Obama’s new jobs plan addresses these major areas, among others:
- Extending unemployment
- Closing tax loopholes
- Cutting payroll taxes for employers in a couple different ways
- Extending 2011 payroll tax cuts into 2012
- Modernizing schools with a focus on low-income areas
- Repairing roads and bridges
- Increasing business expensing to encourage investment
- Hiring and/or preventing layoffs of teachers and first responders (like fire fighters and police officers)
- Giving companies incentives to hire veterans and the long-term unemployed
- Investing in job training for low-income individuals
- Providing pathways back to work for the unemployed
Following is a more in-depth look at several controversial or otherwise popular provisions you may be wondering about.
2012 Payroll Tax Cut Extension for Individuals
In 2011, working Americans saw a two percentage point decrease in payroll tax paid on earnings up to $106,800 (we paid 4.2% instead of 6.2%). Obama is proposing that payroll taxes be decreased even further in 2012 for an extension and enhancement to the 2011 payroll tax cut.
The jobs bill contains a provision for 2012 payroll taxes to be 3.1% instead of the normal 6.2% for earnings up to $106,800. Tom Murse of About.com has provided an excellent plain-language explanation of the 2012 payroll tax cut, including examples of tax savings at several levels of income.
2012 Payroll Tax Holiday for Employers
Under this provision, U.S. companies will only have to pay 3.1% payroll tax on the first $5M in payroll (as opposed to the normal 6.2% tax rate). Running the numbers, this means companies may receive up to $155,000 of tax relief (3.1% of $5,000,000) from the 2012 payroll tax holiday.
2011 and 2012 Payroll Tax Credit for Companies
In addition to the payroll tax holiday discussed above, companies will also be able to get a full refund of payroll taxes paid for increasing wages in the last quarter of 2011 and throughout 2012, up to a certain threshhold.
The 2011 payroll tax credit is worth 6.2% of the increase in wages (up to $12.5M) from 10/1/11 – 12/31/11 over the same period in 2010. The 2012 payroll tax credit is worth 6.2% of the increase in 2012 calendar year wages over 2011 wages (up to a $50M increase) minus any payroll tax cut (discussed above) already received on the first $5 million of payroll in 2012.
Preventing Teacher Layoffs and Creating Additional Jobs in the Education Sector
The American Jobs Act of 2011 provides funding to states specifically for teacher salaries in the 2011-2012 and 2012-2013 school years. Each state’s governor must request a portion of the funding, to be allocated according to a special apportionment formula, primarily based on population, and each governor and recipient institution must adhere to guidelines set forth in the Act related to how the funds must be spent. Restrictions include things like not using the money for establishing rainy day funds, paying down state debts, or going toward a significant amount of administrative costs.
More Plain-Language Explanations of the 2011 Jobs Act
Anyone who is so inclined can easily pull up the actual text of the 2011 jobs act, but I must warn you – it’s an extremely long and dry read! (Yes, I did read most of this bill, and it was super boring! LOL) If you want a quick overview of the provisions contained in the bill, the White House has a handy fact sheet online. Although it is written from a biased point of view, you can still obtain key facts to help you make up your mind about the bill.
What Do You Think of the American Jobs Act of 2011?
I would like to hear what you have to say! Is there a certain provision you absolutely love or hate? Do you think the bill tries to do too much or do you think it needs something more?