Feb 12 The Evolution of the Senate “Jobs” Bill

From the in-box I get this from a friend of a friend of Brad Dayspring, Press Secretaryto Republican Whip Eric Cantor... Yesterday, we noted that the Baucus/Grassley bill was more accurately described as an “extenders bill,” not a “jobs bill.”  Now that Majority Leader Reid has taken a hatchet to the bill (Boy, that escalated quickly!) it can no longer be accurately called an “extenders bill.”   So, it’s not a “jobs bill,” and it’s not an “extenders bill,” and we’re not sure what the hell to call it.  Regardless, here are the leftovers remaining in the “Reid Scraps Bill.”

Step One: Two Senators unveil a bill that is far more accurately described as an extenders bill, not a jobs bill.

Step Two: Majority Leader Reid IMMEDIATELY takes a hatchet to the proposal, creating even more uncertainty for thousands of businesses that are expecting, at a minimum, that current tax policy will be extended and they won’t face tax increases this year.  

The Results of the “Reid Hatchet” on the Senate Bill:

·       It extends expired tax provisions (the extenders): $31 B

·       It extends unemployment benefits: $22 B

·       It extends COBRA benefits for the unemployed: $3 B

·       It extends the Medicare doc payment fix for seven months: $10 B (also includes cost of other misc.  health care extenders)

·       It extends the highway bill

·       It extends increased expensing thresholds


In addition:

·       It modifies Build America Bonds: $2 Billion

·       It includes $1.5 Billion in new spending for agriculture emergency assistance

·       It provides $13 Billion in new, temporary tax relief for employers who were likely going to hire anyway. An employer hiring someone who has been unemployed for 60 days would be exempt from the 6.2% Social Security payroll tax up to $106,800 (FICA wage cap). If they keep the employee for 52 weeks, the employer will also get a $1,000 tax credit.  Even NFIB has said this will have little impact on hiring.

EXAMPLE: Big Boomer’s Pizza and Subs is an employer looking to hire.  So, if Boomer hires someone at a salary of $50,000, for the remainder of the year he would save $3,100 over the course of the year.  Should the employee remain on board for 52 weeks, Boomer’s Pizza will receive an additional $1,000 on their 2011 tax return.  All told, Boomer would have to spend $50,000 (plus the cost of additional benefits) to save $4,100.  Unfortunately, the problem is that right now Big Boomer is facing so much uncertainty from Washington (the threat of higher taxes, health care mandates, increased energy costs, etc.) that he can’t risk spending the original $50,000.   More accurately, the largest incentive in this bill is for an employer who is hiring anyway to hire the individual who has been unemployed for 60 days versus the individual who has been unemployed for 50 days.


Offsets:

·       Foreign Tax Compliance: $9 B

·       Black Liquor: $24 B

·       Economic Substance Doctrine: $5 B

·       Reducing in the Medicare Improvement Fund: $8 B

·       Pension Relief (actually increases tax revenue): $6 B

·       Delay in world-wide interest allocation