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TreasureKY -> RE: Opinions on President Obama's Jobs Speech... (9/8/2011 10:47:02 PM)
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quote:
ORIGINAL: farglebargle
You can now end your speculation. Here's the details.
Read away, bitches!
http://www.whitehouse.gov/the-press-office/2011/09/08/fact-sheet-american-jobs-act
Lovely, adult language there, fargle. No wonder people here are so anxious to try and engage with you. [8|]
So... here's a portion of the outline from the White House. I've interspersed the bullet points with my take and questions. If I don't mention a particular part of the "plan", it's because I lack sufficient information right now, have no serious problem with it at the moment, or Firm has already mentioned it.
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- Cutting the payroll tax in half for 98 percent of businesses: The President’s plan will cut in half the taxes paid by businesses on their first $5 million in payroll, targeting the benefit to the 98 percent of firms that have payroll below this threshold.
Does anyone here know what "payroll taxes" are for businesses? They are, in a nutshell: - Social Security taxes (6.2% up to the annual maximum)
- Medicare taxes (1.45% of wages)
- Federal unemployment taxes (FUTA - 6.0% on the first $7,000 in wages)
- State unemployment taxes (SUTA)
Employers do not pay any kind of "income tax" on the money paid to employees. On the contrary, wages and benefits paid to employees are deductions on the employer's own taxes.
Employees' Pay - You can generally deduct the pay you give your employees for the services they perform for your business.
So... halving Social Security, Medicare and FUTA. Let's take an example and see how much we're talking about.
Under Obama's plan, Acme Plumbing hires Joe Schmoe as a full-time plumber for $14.50 an hour. For every two-week pay period, Acme pays the following Federal payroll taxes for Joe:
Social Security - $35.96
Medicare - $8.41
FUTA - 34.80 (but only for the first six paychecks that Joe earns)
Now... depending upon the State that Acme operates in, they have SUTA to pay, as well. But I'm dubious about Obama being able to unilaterally make States halve their required payments, too.
So... the incentive for Acme to hire more plumbers is that for every $1239.17 they spend ($1160 in base pay, $79.17 in "payroll taxes"), they save $79.17.
Wow... that's really helpful to a small business.
But wait, there's more in the details...
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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 but targeting it to the 98 percent of firms with wages below this level.
They identify the tax being cut to 3.1%... so it's only the Social Security tax that will be cut. That changes the equation in my above incentives example to for every $1282.38 they spend ($1160 in base pay, $35.96 SS, $16.85 Medicare, & $69.60 FUTA), they save a whopping $35.96.
Wow... that's even better. I'm sure there's loads of small businesses out there who've been holding off their hiring because of that $36. [&:]
But there's more!
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- A complete payroll tax holiday for added workers or increased wages: The President’s plan will completely eliminate payroll taxes for firms that increase their payroll by adding new workers or increasing the wages of their current worker (the benefit is capped at the first $50 million in payroll increases).
Hmmm... the devil is in the details.
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Temporarily Eliminating Employer Payroll Taxes on Wages for New Workers or 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.
So... they won't have to pay any Social Security. Temporarily, that is.
I'm not so sure how well that's going to work out for the Social Security Fund, in the long run. I wonder if Obama has been talking to Perry on the sly...
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- Extending 100% expensing into 2012: This continues an effective incentive for new investment.
Sounds great to the masses, but it all depends on the business' accounting method.
Excerpts from IRS Publication 538:
Most individuals and many small businesses use the cash method of accounting.
Under the cash method, generally, you deduct expenses in the tax year in which you actually pay them.
The following entities cannot use the cash method, including any combination of methods that includes the cash method. (See Special rules for farming businesses, later.) - A corporation (other than an S corporation) with average annual gross receipts exceeding $5 million. See Gross receipts test, below.
- A partnership with a corporation (other than an S corporation) as a partner, and with the partnership having average annual gross receipts exceeding $5 million. See Gross receipts test, below.
- A tax shelter.
So who really benefits most from this?
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- Expanding access to high-speed wireless as part of a plan for freeing up the nation’s spectrum.
This one is funny to me. You have to understand that increasing high-speed wireless access actually uses more spectrum, though.
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To ensure that the American Jobs Act is fully paid for, the President will call on the Joint Committee to come up with additional deficit reduction necessary to pay for the Act and still meet its deficit target. The President will, in the coming days, release a detailed plan that will show how we can do that while achieving the additional deficit reduction necessary to meet the President’s broader goal of stabilizing our debt as a share of the economy.
So... responsibility for figuring out how to pay for this gets laid on others, but he'll chip in some ideas when he gets around to it. [&:]
Edited to adjust formatting.
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