This is the final installment of this blog’s summary of the American Jobs Act. This installment was delayed by a very slow internet connection at a hotel in Steamboat Springs, where I was over the week-end. The dog didn’t eat my homework, the internet did!

We start with Title V: Offsets. This is the section of the act that deals with paying for the programs laid out in the first 133 ½ pages.

Section 401 puts a limit on tax deductions. The limits are imposed on joint tax returns with gross income of $250,000 or more; head of household tax returns with gross income of $225,000 or more; married, but filing singly tax returns with gross income of $125,000 or more; and all other tax returns with gross income of $200,000 or more. There is a condition that the adjusted taxable income exceeds the minimum marginal rate amount. There are formulas to determine how taxes are increased, but the gist is that no more than 28% of gross income may be deducted. There are several pages of clarification and limits that reflect the complexity of the current tax code, and discuss impacts on the Alternative Minimum Tax.

Section 411 discusses how Partnership Interests are treated in the tax code, when one partner receives a distribution in connection with services provided to the partnership.

Section 412 discusses the special case where a partner manages investments for the partnership. It treats capital gains as ordinary income, and discusses the treatment of capital gains and losses in any one tax year. Pages and pages of discussion again reflect the complexity of the current tax code, and impacts on individual revenue streams and costs. While increasing the tax rate from a capital gains tax rate, it also reduces penalties for underpayment.

Subtitle C closes a loophole for corporate jet depreciation for property put into service after December 31, 2012.

Subtitle D, beginning with Section 431 eliminates a deduction for intangible drilling and development costs on oil and gas wells. Section 432 eliminates a deduction for “tertiary injectants” (whatever they are.)Section 433 repeals deductions for percentage depletion for oil and gas wells. Section 434 disallows Section 199 deductions for oil and gas products. Section 435 changes how oil and gas investments are treated by passive investors. Section 436 amortizes geological and geophysical expenditures over seven years. Section 437 repeals the “enhanced oil recovery credit.” Section 438 repeals the “marginal well production credit.”

Subtitle E changes the treatment of foreign taxes on U.S. tax returns. Section 422 specifically deals with oil and gas income.

Subtitle F provides for an increased target and trigger for the super committee. The target for deficit reductions is increased from $1,500,000,000,000 to $1,950,000,000,000. If a joint committee bill achieves an amount in excess of $1,650,000,000,000, then certain sections regarding tax codes contained in the American Jobs Act do not go into effect.

My opinion about this bill will be the subject of a Free Press article to be published on Friday. The short version of my opinion is that it has zero chance of being passed, and that punting to the super committee was lazy, given all the detail contained in the program section of the bill.

 Homework

American Jobs Act, Pages 134-155

Subtitle B, Section 351, provides employers with tax credits if they hire the long term unemployed, including some not-for-profit employers. Basically the long term unemployed are people who haven’t been students, and haven’t had a job for six months.

Subtitle C, Section 361 is about “pathways back to work.” It pays part of an employee’s salary if the employee is considered low-income or otherwise disadvantaged.

Section 365 provides funds to states and Indian Reservations to support summer employment for students. The funds are to be targeted to low-income youth (ages 16 to 24) working in jobs that are directly related to “academic and occupational learning.” Funds can be used to provide things like transportation or child care in order to enable the youth to participate. Another section provides funds targeted to help high school dropouts, or high school graduates who is “basic skills deficient.” The focus is to direct the youth to jobs that are in emerging industries, or local industries with a high demand for workers or jobs with public sector employees or not-for-profits where there is a community need. Reporting is required about the funds spent, the number of jobs created, the number of youth participating in the programs.

Subtitle D, Section 371 is called the “Fair Employment Opportunity Act of 2011.” It prohibits employers from using unemployment as criteria to disqualify a job applicant. It treats discrimination against an unemployed worker as any other violation of civil rights, with fines for the employer. It removes sovereign immunity from governments in the case of discrimination against unemployed workers.

Section 378 is the standard “Severability” clause, which says that if one section of the bill is “held to be invalid” the rest of the bill is still valid.

The balance of this Act is about how to pay for it. Stay tuned for the next installment!

Homework

Pages 114-134 of the American Jobs Act

This is Part 3 in a series of posts summarizing the American Jobs Act. I promised myself that I wouldn’t write an opinion about it until I had read the whole thing. My opinion will be the final post in the series.

Section 261 is titled “Project Rebuild” and allocates money to local housing authorities for the purpose of redeveloping abandoned and foreclosed upon properties to stabilize impacted neighborhoods. A formula is to be developed to direct funds to states with the highest levels of foreclosures. This money can go to governments and/or not-for-profits with a demonstrated ability execute these kinds of projects. The reporting on this section includes jobs created and how the property values have been stabilized. There is a requirement to leverage the funds with funding from other private sources. There are limits on the amount of funds that can be used to demolish existing structures, with prohibitions against demolishing public housing projects, or using the funds on commercial properties, or using the funds in up-scale neighborhoods. Preferential treatment is prescribed if the project is to develop affordable rental housing.

Subtitle H is concerned with a national wireless initiative. I’m so unfamiliar with the technology that is discussed in the act, that it was all gobbledygook to me. It includes things like auctions of bandwidths and usage of communications satellites. I loved the term “terrestrial broadband rights” but am clueless about what it means. This section establishes a corporation to hold a public safety wireless license, so I’m assuming the purpose is to get all public safety entities using the same bandwidths so that they can communicate in the event of natural or man-made disasters.

Title III discusses “pathways back to work” for unemployed workers. It extends unemployment compensation benefits to January of 2013. It also requires the states to provide information to unemployed workers about the local labor marked, a skills assessment, an orientation to unemployment services, and help with a “reemployment plan.”

There is a section that addresses the needs of self-employed individuals that includes “any entrepreneurial training that the State may provide in coordination with programs of training offered by the Small Business Administration, which may include business counseling, mentorship for participants, access to small business development resources, and technical assistance.”

There is also a Bridge to Work program to fund state’s efforts to get their citizens back to work. Essentially the state would pay workers out of “Bridge to Work” funds when they are placed with an “eligible” employer on a temporary basis. The individual can work for up to eight weeks, and up to 38 hours a week. Governments are not “eligible” employers. Funds can’t be used to take over-time away from an existing employee, or if the company fires an employee and replaces them with a program participant. If at the end of the program, the company does not offer permanent employment to the program participant, they are barred from further participation in the program.

Section 341 describes a “short time compensation program.” An employer, who reduces hours of employees in order to avoid layoffs, can get emergency compensation for impacted employees so that their wages are not dramatically cut. The employer must reimburse the state for 50% of the benefit paid to the employee.

The next post will start with hiring preferences for the long time unemployed.

Homework

American Jobs Act, Pages 57-114

Part II of the Act is concerned with modernizing community colleges, and provides for grants to states for the purpose of improving existing facilities at Community Colleges. Formulas govern how much money each state would be eligible to receive, with a reallocation provision for unrequested or unused funds. The application process requires the state to describe how the improvements will enhance the school’s ability to deliver a quality education, and how many jobs would be created by the project. Also, some description of how the project is “green” is required. Follow-up reporting on the actual use of the funds and jobs created is required. Funds can’t be used for routine maintenance, stadiums, religious education (including houses of worship and seminaries.)

There is a lengthy definitions section which sets out the kinds of improvements that would be eligible for funding. They include fixing anything that might harm the health of students, roofs, electrical systems, plumbing, windows, security doors, alarms, accessibility, asbestos removal, energy efficiency, technology. The schools are required to Buy American.

Subtitle E is a section about improving transportation in the U.S., on Indian Reservations, and in Puerto Rico.  Funding for up to 100% of airport improvement projects, passenger and freight train projects (including high speed rail and Amtrak), sea port improvements, and local public transportation systems is available. There are set-asides to fund research into the “Next Generation” of air traffic control, for transportation training programs (with specific targeted goals, i.e. improving workplace diversity, alleviating workforce shortages, and job retention rates) and helping “disadvantaged business enterprises.” If funds aren’t used within a specified time frame, the funds can be reallocated to a different state. In the case of Amtrak, subsidizing operating costs is specifically prohibited.

Subtitle E also provides funding for highway systems, including the reconstruction of bridges and overpasses. There are requirements that the people hired to work on these projects live in or adjacent to the area where the project is located, and to Buy American.

This section contains “findings” which quote several studies about the state of transportation infrastructure in the US, including reports from the World Economic Forum, the World Bank, the University of Massachusetts, the American Society of Civil Engineers, the National Surface Transportation Policy and Revenue Study Commission. The reports are cited to demonstrate the need for improvement, and the willingness of private investors to invest in improvements, as a preamble to setting up an Infrastructure Bank.

The “United States Government-owned, independent, professionally managed institution” would institute a “merit-based” system to make credit decisions on projects. Projects financed may be “any non-Federal transportation, water, or energy infrastructure project.” Projects must contribute to the economic competitiveness of the U.S. Projects would be approved by a seven member Board, appointed by the President, approved by the Senate, with no more than four members from any one political party. Board meetings must be open to the public and be announced via “reasonable public notice.”

There are several pages of descriptions of the duties of the Board and management of this institution which include no tolerance for conflicts of interest and a Special Inspector General who is authorized to contract for things like external audits.

Loan criteria: demonstrable public benefit. local support and jobs creation with a prohibition on refinancing existing projects. Environmental concerns must be mitigated and innovation designed to control costs will be rewarded. This section makes clear that projects being funded are loans, not grants, and that the federal government expects to be repaid out of tolls or fees on the project over a period of 35 years. The expectation is that federal loans would only fund up to 50% of a project, with the remainder coming from other sources. There are no pre-payment penalties.

The next installment of this summary of the American Jobs Act will start with page 57 and “Project Rebuild,” which is about rebuilding neighborhoods where foreclosures are high.

Homework

Pages 22–57 of the American Jobs Act

This will be a multi-day effort because the Act is long (over 150 pages) and contains many moving parts.  Everything in the bill won’t be covered, only those things that have been brought to my attention or that I have a strong opinion about. As usual, since this is written as a bill, it would require the reading of many other existing laws, which are amended by this bill. I don’t have a staffer to dig out all the other bills that are mentioned, so my understanding will be limited to the actual text of the bill.

Today’s blog will focus on the first 22 pages of the Act. That leaves 133 pages to cover over the next few days.  Hope it doesn’t get too boring!

One of the concerns I’ve heard from senior citizens is about what the American Jobs Act does to Social Security. The question stems from the granting of a tax holiday on FICA taxes for a one year period. Section 101(e) gives the answer to that question. Even though the FICA taxes would not be collected from either the worker or the employer, the amount that would have been collected will go into the Social Security Trust Fund out of an appropriation of general revenues. There would be no harm done to Social Security.

Section 113 provides a tax credit to employers who hire returning veterans who have not been able to find employment within six months of separation from the military. It only applies to hiring veterans after the Act is passed.

Section 202 provides funds to states and tribal governments to prevent layoffs of and/or hiring new teachers. To receive funds, the governor of a state must submit an application that meets certain criteria. If the governor fails to submit an application, funds will be made available to other educational facilities in that state. If funds are not requested by any entity in the state, that state’s funds can be allocated to the rest of the states.

The Act contains specific funding formulas for use of any allocated funds, with the money being directed to early childhood, elementary and secondary education. There are also specified things that the funds cannot be used for, including to create a rainy day fund or to retire any debt obligation of the state. Finally the state is required to report on the number of jobs created or retained with the funds, and how the money was used.

Section 213 provides funds to states and “localities” for the purpose of preventing layoffs and/or hiring new first responders.

Sections 221-227 provide funds to repair public schools, including on those operated or funded by the Bureau of Indian Education.  Again, the allocation of funds is by formula which gives consideration to localities that have high levels of children living in poverty. If the funds are not requested by the state, the localities can request them. If there is no request for funding by either a state or a locality, the funds can be allocated to other states.

There are many criteria attached to the allocation of these funds, including the impact the project will have on jobs creation, the financial sophistication of the administrator of the local project, the ability to leverage funds from other sources, and how “green” the project is. Funds may not be used on new construction, for routine maintenance, or for stadiums or other venues that regularly charge admission. Under certain circumstances funds under this section could be allocated to private schools.

Tomorrow we’ll look at the next few sections, which start with funding for community colleges.

Homework

Pages 1 – 22 of the American Jobs Act

I haven’t read the entire bill yet, so am refraining from further comment until I do. This time we’ll both be doing our homework at the same time! Please leave your comments after doing your homework.

Homework

Summary of Act Prepared by White House for Media

Full Text of the American Jobs Act (pdf)

Everything done by an elected official is probably political, even when they try to sound like they are looking out for “we the people.” Both the Republicans who sat in stony silence and Obama who had genuine fire in his eyes were thinking of the political consequences. Obama has seen his polling numbers fall to an all time low because of the continued depressed economy. Obama needed to look like a leader and challenge the Republican legislators to stop obstructing everything. He did throw down the gauntlet, but I seriously doubt that the GOP is going to pass the American Jobs Act as it is presented to them next week.

Evidently Harry Reid knows how to play political hard ball. When he learned that some GOP Senators were planning to skip the speech, he scheduled important votes in the chamber immediately before and after the speech. Good job, Harry! But what is wrong with Republicans that they would show such disdain for the leader of the free world? Their actions are not just weakening this president; they are weakening the office of the president, any president.

Now for the specific programs in the American Jobs Act (All points are exact quotes taken from the speech):

·         The purpose of the American Jobs Act is simple: to put more people back to work and more money in the pockets of those who are working. It will create more jobs for construction workers, more jobs for teachers, more jobs for veterans, and more jobs for the long-term unemployed. It will provide a tax break for companies who hire new workers, and it will cut payroll taxes in half for every working American and every small business.

·         … small businesses will get a tax cut if they hire new workers or raise workers' wages. … all small business owners will also see their payroll taxes cut in half next year. If you have 50 employees making an average salary, that's an $80,000 tax cut.

·         Building a world-class transportation system is part of what made us an economic superpower. And now we're going to sit back and watch China build newer airports and faster railroads? At a time when millions of unemployed construction workers could build them right here in America?

·         The American Jobs Act will repair and modernize at least 35,000 schools. It will put people to work right now fixing roofs and windows; installing science labs and high-speed internet in classrooms all across this country. It will rehabilitate homes and businesses in communities hit hardest by foreclosures. It will jumpstart thousands of transportation projects across the country.

·         … we'll set up an independent fund to attract private dollars and issue loans based on two criteria: how badly a construction project is needed and how much good it would do for the economy. This idea came from a bill written by a Texas Republican and a Massachusetts Democrat.

·         … companies will get extra tax credits if they hire America's veterans.

·         … companies will get a $4,000 tax credit if they hire anyone who has spent more than six months looking for a job.

·         … extends unemployment insurance for another year.

·         … the typical working family will get a fifteen hundred dollar tax cut next year.

·         … a week from Monday, I'll be releasing a more ambitious deficit plan – a plan that will not only cover the cost of this jobs bill, but stabilize our debt in the long run.

·         … it's a balanced plan that would reduce the deficit by making additional spending cuts; by making modest adjustments to health care programs like Medicare and Medicaid; and by reforming our tax code in a way that asks the wealthiest Americans and biggest corporations to pay their fair share.

·         I'll also offer ideas to reform a corporate tax code…

·         … if you're a small business owner who has a contract with the federal government, we're going to make sure you get paid a lot faster …

·         Federal housing agencies to help more people refinance their mortgages at interest rates that are now near 4% -- a step that can put more than $2,000 a year in a family's pocket, and give a lift to an economy still burdened by the drop in housing prices.

·         Now it's time to clear the way for a series of trade agreements that would make it easier for American companies to sell their products in Panama, Colombia, and South Korea …

·         Jobs Council of leaders from different industries who are developing a wide range of new ideas to help companies grow and create jobs.

·         the next election is fourteen months away. And the people who sent us here – the people who hired us to work for them – they don't have the luxury of waiting fourteen months.

Pass the American Jobs Act NOW.

Homework

Full Text of Obama's Job Speech