The American Jobs Act proposed by President Obama could create or support more than 26,000 jobs and inject at least $1.5 billion into Minnesota, according to estimates by the Obama Administration. Those jobs include teachers, police, firefighters, engineers, construction workers and more. The Jobs Act is a package of tax cuts for employers to provide incentives for hiring, infrastructure investments, assistance to those looking for work, and tax cuts for individuals.
The proposed strategies include some of the most effective ways to support economic growth. The Center on Budget and Policy Priorities reinforces in a recent statement:
We need to boost the economy in the short run by enacting legislation that would, for example, extend unemployment insurance benefits and the temporary cut in payroll taxes beyond their scheduled expiration at the end of this year, provide more assistance to states to temper their need to impose more layoffs and cut more spending to balance their budgets, and create programs that would put people back to work on projects such as renovating and modernizing America’s schools. Such temporary policies would help boost growth and employment now without adding significantly to long-term deficits and debt.
Some of the main components of the bill, and the impact on Minnesota estimated by the Administration, are:
Tax cuts for employers
- Payroll taxes would be cut in half for employers’ first $5 million in wages. In Minnesota, an estimated 120,000 employers would benefit from this cut.
- Employers who increased their payroll (by adding new workers or increasing the wages of current workers) would pay no payroll taxes on up to $50 million of the increased payroll.
- Employers would receive tax credits of $5,600 to $9,600 for hiring unemployed veterans, and a $4,000 tax credit for hiring long-term unemployed workers.
- The bill invests $50 billion in highways, transit, rail and aviation. The highway and transit portion alone would provide an estimated $608 million in Minnesota and support a minimum of approximately 7,900 jobs.
- Layoffs of up to 280,000 teachers nationwide would be prevented. The bill would also support hiring thousands more teachers and keep police and firefighters on the job. Minnesota would receive an estimated $504 million. These funds would support up to 6,900 teacher and first responder jobs.
- At least 35,000 public schools nationwide would benefit from school infrastructure investments. Minnesota’s share totals $275 million and would support up to 3,600 jobs.
- Hundreds of thousands of vacant and foreclosed homes and businesses would be rehabilitated. Minnesota could receive approximately $101 million, and could apply for more through a competitive bidding process.
- Facilities at community colleges would be modernized. Minnesota could receive $88 million.
Pathways back to work
- The Unemployment Insurance (UI) system would be reformed to help the long-term unemployed transition back to work. An estimated 71,000 Minnesotans are among the nation’s long-term unemployed.
- Unemployment Insurance benefits would be extended, preventing at least 13,400 unemployed Minnesotans from losing their benefits during the first six weeks.
- Low-income youth and adults would access work opportunities or obtain job training in growth industries through the Pathways Back to Work Fund. This could place 6,500 Minnesota youth and 1,700 Minnesota adults in new jobs.
- Hiring discrimination against the unemployed would be prohibited.
Tax cuts for workers
- The payroll tax cut passed in December 2010 would be expanded to cut workers’ payroll taxes in half in 2012. A typical Minnesota household with an income of around $56,000 would receive a tax cut of approximately $1,740.
When releasing the Jobs Act, President Obama emphasized that the bill would not add to the federal deficit. He proposes to pay for the bill through tax changes including new limits on itemized deductions for high-income Americans (individuals with incomes above $200,000 a year and families with incomes above $250,000 a year), by closing tax preferences for the oil and gas industries, and by changing the depreciation rules for corporate aircraft.
While it is highly unlikely that Congress will approve the entire bill, discussions have begun on Capitol Hill to determine whether agreement can be reached to pass parts of the bill. The continuing weak economy and high unemployment increase the pressure on the Administration and Congress to act.