If you watched Presdient Obama's speech last night most of the proposals were directed at small businesses. So – what can we all expect? Here's a quick snapshot of Obama's speech, both the benefits of the proposal and some analysis of the methods of payments. I'll be blogging more in the coming weeks as more clarity around Obama's proposal surfaces.
According to the White House's American Jobs Act fact sheet, the following are targeted business benefits:
- Cut the payroll tax in half for businesses on the first $5m in payroll.
- No payroll taxes for new workers or wage increases – capped at $50m in increases (boy – that would be great to grow by that much!)
- Sec 179 (immediate deduction of qualified new assets) extended through 2012.
- Tax credit of $5,600 - $9,600 for hiring of veterans
- $4,000 tax credit for hiring someone that has been unemployed for a long period.
In addition, there are provisions for increased infrastructure spending (see Economist Analysis) in addition to changes in unemployment rules and an extension / increase in the employee portion of payroll taxes.
So – how to pay for it all?
Here's a quick snapshot of the House Democrat summary of revenue raising (e.g. tax increases – or ends of tax credits / deductions) in advance of the Joint Select Committee (also known as the super committee).
- A surtax of 5% based on a reduction of exclusions / exemptions / deductions for income of anywhere between $500k - $1m for individuals.
- A 5.4% surcharge on married filing jointly income over $1m ($500k for everyone else)
- The repeal of Bush Tax Cuts in 2012 instead of 2013 for individuals
- Day trading taxed at ordinary income rates (versus current 60% long term, 40% short-term gain), along with changes to carried interest rules.
- Estate taxes revert back to 2009 levels in 2012 versus 2013.
- Change of depreciation rules from MACRS (where more is depreciated up front) to ADS – which is slower.
- Corporate jets depreciated over seven years instead of five (the infamous loophole).
- Change in S-Corp rules whereby professional services firms with three or fewer key individuals would have to pay payroll taxes on all income (versus the reasonable wage rule) – same applies if a the professional holds ownership in another company that subsequently owns the S-Corp.
- Eliminate tax preferences for oil companies (domestic production activities deduction, last in first out accounting treatment for inventories – which works well in periods of rising prices – as oil has been doing in the past several years).
So – what do you think of Obama's speech? Are the incentives enough to get America working again? Are the proposed revenue increases job killers?