October 10—American Jobs Act introduced in Senate with millionaires’ surtax & deferred government contractor withholding.

Late on October 5, Senate Majority Leader Harry Reid (D-NV) introduced S. 1660, the American Jobs Act of 2011. Reid made changes to the President’s original Jobs Act proposal (see ¶ 1975 ) by replacing the original pay-fors in the President’s plan with a millionaires’ surtax. Reid’s bill also would add a provision deferring controversial governmental contractor withholding until 2014.

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, would make the following tax changes:

… Extend through 2012 the 100% bonus first-year depreciation deduction that generally applies only for assets placed in service before 2012 under current law.

… Defer until after 2013 the Code Sec. 3402(t) requirement for government entities to withhold 3% from nearly all contract payments made to persons providing them with property or services.

… Cut the employer portion of the Social Security tax (Old Age, Survivors and Disability Insurance, or OASDI, tax) for employers in half 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.

… 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 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.

… Cut 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.”

… 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.

… Effective for new hires after the enactment date, create a tax credit of up to $4,000 for hiring workers who have been looking for a job for over six months.

The American Jobs Act would be paid for through a 5.6% surtax on modified adjusted gross income (MAGI) in excess of $1 million for single filers, heads of households, and marrieds filing jointly ($500,000 for married taxpayers filing separately). The surtax would apply for tax years beginning after Dec. 31, 2012, and the $1 million threshold would be inflation-indexed after 2013. For surtax purposes, MAGI would mean AGI reduced by any deduction (not taken into account in determining adjusted gross income) allowed for investment interest (as defined in Code Sec. 163(d) ). In the case of an estate or trust, AGI would be determined as provided in Code Sec. 67(e) .