American Jobs Act Introduced In Senate

Late on October 5, Senate Majority Leader Harry Reid (D-NV) introduced S. 1660, the American Jobs Act of 2011. Making the headlines: Reid made changes to the President’s original Jobs Act proposal by replacing the original pay-fors in the President’s plan with a millionaires’ surtax.

However, there are a number of notable tax incentive items included such as a 50% reduction in the employer portion of the Social Security tax (Old Age, Survivors and Disability Insurance, or OASDI), from 6.2% to 3.1% on the first $5 million in wages paid by all employers, private or public (but not for government workers or household help). That would work out to a maximum reduction of $155,000. The OASDI rate for self-employed individuals would be cut as well.

Additionally, for the last quarter of 2011 and for calendar year 2012, it would 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 which could be utilized by all private or public employers (but not for government workers or household help), would be available on up to $50 million of an employer’s increased wages. There is also a similar 50% reduction in Social Security taxes 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.”

Under the work opportunity tax credit, which under current law applies only to qualifying hires before 2012, employers that hire veterans who have been unemployed for at least 6 months and have a service-connected disability are eligible for a maximum tax credit of $4,800. Effective for new hires after the enactment date, the proposal would increase that credit to $9,600. It also would create a new tax credit of up to $2,400 for hiring veterans who have been unemployed for at least 4 weeks, and a tax credit of up to $5,600 for hiring veterans who have been unemployed for at least 6 months. IRS would have the authority to provide alternative ways to certify a veteran’s unemployed status. Finally, effective for new hires after the enactment date, it would create a tax credit of up to $4,000 for hiring workers who have been looking for a job for over six months. Reid filed cloture on the bill on October 6, and the vote on cloture is slated to take place the week of October 13. S. 1660, the American Jobs Act of 2011. (Legislative text of S. 1660, the American Jobs Act of 2011. Summary of S. 1660, the American Jobs Act of 2011). (© 2011 by Thomson Reuters/RIA).