As with most legislation, the recently derailed American Jobs Act included some good ideas, some bad, and some that were mere political posturing. But now that it has been defeated in the Senate, the focus is on what parts of it might survive in separate future pieces of legislation.
The bill included a number of business-friendly, tax-cutting measures designed to improve the nation’s employment landscape. Among the provisions that may be proposed in the future as separate legislation are the extension of 100 percent bonus depreciation, cuts in both employee and employer payroll tax, and enhancement of the work opportunity tax credit to include longer term unemployed persons.
Currently, 100 percent bonus first-year depreciation is set to expire at the end of the year. Under the Jobs Act proposal, it would have been extended through the end of 2012.
The employer share of OASDI (the Old Age, Survivors and Disability Insurance, or Social Security tax) was to be cut in half from 6.2 percent to 3.1 percent on the first $5 million in wages in 2012. Similar benefits applied to self-employed individuals.
A “payroll increase credit” would give qualified employers a tax credit for increases in wages from the corresponding period of the prior year. And social security taxes would be cut in half for workers, from 6.2 percent to 3.1 percent, for 2012.
While these proposals, or some form of them, are likely to be reintroduced in the future, one proposal in the Jobs bill has already made it back into the legislative process.
A provision that passed in 2005 requires federal, state and local governments to withhold 3 percent on payments made to government contractors. The original effective date of the provision was January 2011, but it was postponed several times, and currently is set to begin in January 2013. The Jobs Act would have further postponed it until 2014.
But on Oct. 13, the House Ways and Means Committee approved legislation to repeal the withholding rule entirely. The bill, H.R. 647, will enjoy broad bipartisan support, according to chairman Camp.
“The 3 percent withholding tax stands in the way of jobs because it threatens to constrict the cash flow of thousands of small businesses that provide goods and services to federal, state, and local government agencies,” said Rep. Wally Herger (R-Calif.), who introduced the bill. “Permanently repealing this tax is an important step toward giving these businesses the assurance that it’s safe to invest, grow, and hire more workers.”
Since it has 262 co-sponsors from both sides of the aisle, there is a good chance the repeal will pass the House.
One more provision sure to be reintroduced in some form was a pay-for in the Jobs Act, the Warren Buffet-inspired 5.6 percent “millionaire’s tax.” In the meantime, House and Senate Republicans have introduced alternative bills, The Buffett Rule Act of 2011 (H.R. 3099) and its companion bill in the Senate (S. 1676). The measure would require a box on tax forms to allow taxpayers to voluntarily pay more in taxes.
Would it be a much-needed revenue generator? Stay tuned.
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