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Administration submits “American Jobs Act of 2011” to Congress

by Melissa Rager

In the late afternoon of September 12, the Obama Administration submitted the “American Jobs Act of 2011” to Congress. It formally released the legislative text of the proposed jobs-and-stimulus measure, along with a section-by-section summary. Businesses would be the major beneficiaries of the President’s tax proposals, which would:

  • Extend to 2012 the 100% bonus first-year depreciation deduction that generally applies only for assets placed in service before 2011 under current law.
  • Cut the employer portion of the Social Security tax in half from 6.2% to 3.1% on the first $5 million in wages by all employers, private or public (but not for government workers or household help).
  • For the last quarter of 2011, and for calendar year 2012, create a payroll tax credit that fully offsets the employer Social Security tax that otherwise would apply to increases in wages from the corresponding period of the prior year. For example, if an employer paid wages subject to Social Security tax of $5 million in 2011 and $6 million in 2012, the credit to which the employer would be entitled would eliminate the employer’s portion of Social Security taxes on the $1 million of increased wages. The credit would be available on up to $50 million of an employer’s increased wages.
  • Currently, employers that hire veterans who have been unemployed for at least six months and have a service-connected disability are eligible for a maximum tax credit of $4,800. The President’s proposal would increase the amount of that credit to $9,600, and create two new hiring credits for veterans: (1) a $2,400 credit for employers that hire veterans who have been unemployed for at least four weeks; and (2) a $5,600 credit for veterans who have been unemployed for at least six months. These credits would be available to tax-exempt entities and public universities as well as for profit employers.
  • Create a tax credit of up to $4,000 for hiring workers who have been looking for a job for over six months.

The President’s sole tax relief proposal for individuals consists of cutting Social Security taxes in half in 2012 for workers, from 6.2% to 3.1%, thereby providing a tax cut of roughly $1,500 “to the typical family earning $50,000 a year.” The Social Security tax rate for self-employed individuals would be cut as well.

The above changes (as well as other, non-tax revenue losers) would be paid for via a combination of: a 28% limitation after 2012 on the value of all itemized deductions and certain other tax expenditures for “high income taxpayers” (defined by the Administration as those with AGI over $250,000 for married filing jointly, and over $200,000 for single taxpayers); taxing carried interest in investment partnerships as ordinary income; treating general aviation aircraft as seven-year (rather than five-year) MACRS property for depreciation purposes; repealing a number of oil subsidies and modifying certain foreign tax credit rules.

Some of the proposed tax offsets appear to have been taken from an unofficial “wish list” of revenue-raising provisions that House Democrats intend to submit to the Joint Selection Committee (JSC, also known as the super-committee).

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