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American Job Act News in 2011

As part of the group I participate in for the US Senate Finance Committee to assist in the construct and the implementation of the American Job Recovery Program, I can tell you that all of us understand the very difficult threat our “new and problematic economy” has on our businesses, our business lives, and the quality of our personal lives.

For sure we all understand that this economic crisis and the deep recession for business continues, and simply cannot be solved with near term actions. The serious “disconnect” between where the administration and legislative branches are versus what small business requires demands attention and focus.

Our group has been consistent with our message to our legislators and business leaders; we can lead the country to a gradual and more positive economic future. I urge all of us involved to write your legislative representatives and be emphatic that we can rebuild the economy the American Way.

A positive outcome of our session included that it is clear that the President understands to restore the American economy we cannot afford to eliminate American jobs and encourage reckless financial deals that put middle class security at risk.

As a reminder, the purpose of the American Jobs Act is simple: put more people back to work and put more money in the pockets of working Americans.

Below, I have provided a “cliff note version” of what is currently included in the proposed legislation, as well as what our advisory group has proposed and we know is under viable consideration.

Tax Cuts to Help America’s Businesses Grow and Hire Workers

New Tax Cuts to Businesses to Support Hiring and Investment: The proposal includes three tax cuts to provide immediate incentives to hire and invest:

Cutting the Payroll Tax Cut in Half for the First $5 Million in Wages: This provision would cut the payroll tax in half to 3.1% for employers on the first $5 million in wages, providing broad tax relief to all businesses, targeting the 98 percent of firms with wages below this level.

Our advisory committee has recommended this tax cut apply to the first $20 Million of wages for all enterprises with revenues <$50 million.

Temporarily Eliminating Employer Payroll Taxes on Wages for New Workers and Raises for Existing Workers: The President is proposing a full holiday on the 6.2% payroll tax firms pay for any growth in their payroll up to $50 million above the prior year, whether driven by new hires, increased wages or both. This is the kind of job creation measure that CBO has called the most effective of all tax cuts in supporting employment.

Our advisory committee agrees.

Extending 100% Expensing into 2012: The President is proposing to extend 100 percent expensing, the largest temporary investment incentive in history, allowing all firms – large and small – to take an immediate deduction on investments in new plants and equipment.

Our committee agrees however we requested the extension through 2013.

Helping Entrepreneurs and Small Businesses Access Capital: The President’s plan includes administrative, regulatory and legislative measures – including those developed and recommended by the President’s Jobs Council. The proposal calls for Congress to pass comprehensive patent reform, increase guarantees for bonds to help small businesses compete for infrastructure projects and remove burdensome withholding requirements that keep capital out of the hands of small businesses.

Our advisory group proposes that the % of all government contracts of the Small Business Set Aside Programs be increased from a minimum of 25% to 37.5%.
Likewise we proposed that the SBA and the SBIC programs be enhanced with 95% guarantee of interest and fees for the participating bank or SBIC in the amount of $18 billion to be distributed over the next 36 months.

Returning Workers to the Job: While Rebuilding and Modernizing America

Tax Credits and Career Readiness Efforts to Support Veterans’ Hiring: The President is proposing a Returning Heroes Tax Credit of up to $5,600 for hiring unemployed veterans who have been looking for a job for more than six months, and a Wounded Warriors Tax Credit of up to $9,600 for hiring unemployed workers with service-connected disabilities.

Our committee agrees, however we continue to send the message that Tax Credits related to jobs are not sufficient incentives to hire. The small business executive in an economy of this nature will only hire when no other labor option is available, and Tax Credits in a vacuum have proven not to be an effective incentive.

Modernizing Over 35,000 Schools – From Science Labs and Internet-Ready Classrooms to Renovated Facilities: The President is proposing a $25 billion investment in school infrastructure that will modernize at least 35,000 public school investments that will create jobs, while improving classrooms and upgrading our schools to meet 21st century needs. This includes a priority for rural school districts.

Our advisory group recommends that a minimum of 55% of these funded projects be directed to businesses with <$50 million in revenues.

Making an Immediate Investment in Our Roads, Rails and Airports: The President’s plan includes $50 billion in immediate investments for highways, transit, rail and aviation, helping to modernize an infrastructure that now receives a grade of “D” from the American Society of Civil Engineers.

Our advisory group recommends that a minimum of 55% of these funded projects be directed to business with revenues <$50 million.

Project Rebuild: Putting People Back to Work Rehabilitating Homes, Businesses and Communities. The President is proposing to invest $15 billion in a national effort to put construction workers on the job rehabilitating and refurbishing hundreds of thousands of vacant and foreclosed homes and businesses. Building on proven approaches to stabilizing neighborhoods with high concentrations of foreclosures, Project Rebuild will bring in expertise and capital from the private sector, focus on commercial and residential property improvements, and expand innovative property solutions like land banks.

Our advisory group recommends that a minimum of 55% of these funded projects be directed to businesses with <$50 million in revenues.

Pathways Back to Work for Americans Looking for Jobs

Reform Our Unemployment Insurance System to Provide Greater Flexibility, While Ensuring 6 Million People Who Are Scheduled To Lose Benefits Do Not: The proposal includes sweeping reforms to the unemployment insurance (UI) system in place some 40 years now to help those without jobs transition to the workplace.

Our advisory group felt and recommended that an extension of unemployment benefits should be extended at consistently decreasing benefit rates in terms of dollars paid therefore at some point in time the worker is incented to take a paying job versus unemployment.

Reemployment Assistance: States will be required to design more rigorous reemployment services for the long-term unemployed and to conduct assessments to review the longest-term claimants to assess their eligibility and help them develop a work-search plan. These reforms are proven to speed up beneficiaries’ return to work

We recommended that at the state level they be incented with a $250 million incentive based upon a set of “return to work metrics.”

Additional Spendable Income in the Pockets of Every American Worker and Family

Cutting Payroll Taxes in Half for 160 Million Workers Next Year: The President’s plan will expand the payroll tax cut passed last December by cutting workers payroll taxes in half next year. This provision will provide a tax cut of $1,500 to the typical family earning $50,000 a year. As with the payroll tax cut passed in December 2010, the American Jobs Act will specify that Social Security will still receive every dollar it would have gotten otherwise, through a transfer from the General Fund into the Social Security Trust Fund.

Our advisory committee recommends this program be enhanced from 50% to 60% with an additional tax be levied on organizations with payroll greater than $50 million annually. This amount of the tax (%) levied will be determined by the CBO in a separate work initiative.

In closing my personal perspective is that the administration and our legislative representatives are finally getting the message that the “general public and small business arena” is hurting and quite problematic to all of their re-election aspects. Clearly the “disconnect between where their minds have been and where they need to be” is closing. It is clear they will approve legislation that will provide some legislative relief for us; however I expect it to be only a fraction of what is needed to vault the economy to a growth oriented environment.

Our guidance to all of our friends in the small business arena is to focus on: altering your business models to include recurring revenue streams, distribution venues beyond direct sales oriented models, aggressive consideration given to additional growth venues including merger and acquisition initiatives, obtaining the input and skill required for you to be effective in managing the many vicissitudes you face daily and will in the near future.

In closing, please mark your calendars for TeXchange’s November 10th event where our content will be Useful Capital: “What is it and how to obtain it.” Our panelist will be of great insight to you on this very important subject. Let us know at TeXchange how we can be of assistance.

My Kindest Regards to You and Yours,
Garry E. Meier