Edward Palonek ™
Palonek org

Department of Labor Funding Highlights:

Funding Highlights:

• Provides $12.1 billion in discretionary funding for the Department of Labor, an increase
of more than $20 million from the comparable 2012 level. The Budget continues critical
investmentsin training and resources for job seekers. It also includes savings from projected
reductionsin workload for the Unemployment Insurance program and administrative
efficiencies.

• Improves services for workers and job seekers by modernizing the Federal job training
system,including through the creation of a Universal Displaced Worker program. Invests
$150 million in a competitive Workforce Innovation Fund to engage States and localities in
identifying effective models and establishes a Community College to Career Fund to invest in successful job training partnerships between community colleges and business.

• Ensures that Americans who have lost their jobs have the help they need to develop their
skills and return to work and creates employment opportunities for the long-term unemployed and low-income adults and youth.

• Strengthens Job Corps by improving its outcomes and cost-effectiveness and creating
stronger oversight.

• Provides improved re-employment services to newly-separated veterans and focuses
resources on veterans with disabilities or other significant barriers to employment.

• Maintains support for agencies that protect workers’ wages, benefits, health and safety,
and invests in preventing and detecting the misclassification of employees as independent
contractors.

• Assists workers who need to take time off to care for a child or other family member by
helping States launch paid leave programs.

• Safeguards workers’ pensions by encouraging companies to fully fund their employees’
promised benefits and assuring the long-term solvency of the Federal pension insurance
system.

• Improves the solvency of the Unemployment Insurance system by encouraging States to fully fund their programs and works to reduce improper payments in the Unemployment Insurance
program to improve program integrity and cost-effectiveness.


Protects workers who suffer injuries and fatalities while on the job and their families by
modernizing and improving the operation of Federal workers’ compensation systems.

• Builds knowledge about which programs work, including through new approaches to reducing recidivism and increasing employment for young ex-offenders.

Creating Jobs, Opportunity Through Transit Investments

Since President Obama introduced the American Jobs Act a few weeks ago, Secretary LaHood has been an outspoken advocate for its passage, and with good reason.

On Monday, for example, Brian Lombardozzi, a senior policy analyst with the BlueGreen Alliance, joined me to discuss the importance of investing in job-creating transit projects.  And yesterday, I had the chance to extend that conversation at a conference called "Building the Future: New York State Transit Manufacturing Conference."

This extended discussion fits President Obama and Secretary LaHood's message perfectly because transit investments create jobs and opportunities.

Transit literally connects people with opportunities.  It connects them to jobs, to school, to the grocery store. It connects customers to businesses.  For many Americans and American businesses, it’s an absolute lifeline.

But in many places, that lifeline is crumbling.  If we're going to be honest with ourselves, we have to acknowledge that our major transit systems were built and paid for by our parents and grandparents.  The American Jobs Act would provide $9 billion for thousands of jobs repairing bus and rail transit systems.  Once Congress passes the Act, that money will go out quickly and easily into the economy, creating jobs and helping get our transit systems up to speed.

Deputy Secretary of Transportation John Porcari

As I told conference-goers yesterday, the same outcome holds true for American Jobs Act investments in roads, runways, and rail.

 

This past May, I visited the Alstom plant in Rochester, NY.  Alstom, like so many other businesses, had struggled through the last few years’ economic downturn.  But now, their future looks bright.  As a manufacturer of train cars and parts, Alstom has been busy, and--with momentum for high-speed rail gathering steam--they are poised to grow even more.

Alstom

Deputy Secretary of Transportation John Porcari at the Alstom plant in Rochester, NY.

 

In fact, Alstom just opened a new manufacturing facility.  They’re now building signaling components.  And best of all, they’re in the process of adding 200 permanent new jobs for the Rochester area.
Secretary LaHood has talked about companies like Alstom in other states--companies that are forming the  foundation of a renaissance in American rail manufacturing.  And if Congress passes the American Jobs Act, we will see those opportunities expand and see more workers added to more shifts in plants across the country.

American companies and workers continue to face economic headwinds.  But we’re also seeing people come together to find solutions and make plans today that will help our country prosper for years to come.

That’s exactly what yesterday's "Building the Future" conference was all about.  That's what Secretary LaHood has been talking about.  And that's what the American Jobs Act is all about.


American manufacturing, American energy, skills for American workers, and a renewal of American values.

President Obama believes this is a make or break moment for the middle class and those trying to reach it, and he has laid out a blueprint for an economy that's built to last - an economy built on American manufacturing, American energy, skills for American workers, and a renewal of American values.


Five Things You Should Know
1.

Businesses have created more than 5.2 million private sector jobs in the past 31 months.

2.

After nearly collapsing, the U.S. auto industry has added nearly 250,000 jobs -- the fastest pace of job growth in more than a decade.

3.

American manufacturers have added more than 500,000 jobs since January 2012, the strongest period of job growth since 1989. President Obama wants to boost that trend.


Tax Reform: President Obama is proposing tax credit for companies that bring jobs back to the United States, and he's asking Congress to create a new credit for businesses that invest in communities that affected by job loss. He's also pushing to extend tax credits to drive nearly $20 billion of investment in domestic clean energy manufacturing and a provision that allows companies to expense the full cost of their investments in equipment.

Trade Enforcement: President Obama won't stand by while foreign competitors refuse to play by the same rules as the United States. The Commerce Department is currently pursuing a wide range of trade enforcement actions, and the President is proposing to create a new Trade Enforcement Unit that will investigate trading practices in countries that attempt to circumvent international law.

Rebuilding America: For too many companies, the state of American infrastructure creates a competitive disadvantage. We need to rebuild roads and upgrade bridges. We need to retrofit our electrical grid and expand access to high-speed broadband. And to pay for that construction, the President offered a commonsense proposal -- use the money we’ll save by ending the wars in Iraq and Afghanistan. Half the money would go to pay down the deficit, the rest to rebuilding America.


Jobs in Amercia

"Think about the America within our reach: A country that leads the world in educating its people. An America that attracts a new generation of high-tech manufacturing and high-paying jobs. A future where we're in control of our own energy, and our security and prosperity aren't so tied to unstable parts of the world. An economy built to last, where hard work pays off, and responsibility is rewarded."

American Jobs Act

American Jobs Act

"Without a doubt, the most urgent challenge that we face right now is getting our economy to grow faster and to create more jobs…. we can’t wait for an increasingly dysfunctional Congress to do its job. Where they won’t act, I will." —President Barack Obama, October 24, 2011



Tax Cuts To Help America's Small Business Hire And Grow

Cutting the payroll tax cut 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, providing a tax but targeting the benefit to the 98 percent of firms that have payroll below this threshold.

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 (to ensure that this tax cut is focused on small businesses, the tax relief is capped at $50 million in payroll increases)

Encouraging businesses to make investments by extending 100% business expensing into 2012. This extension would put an additional $85 billion in the hands of businesses next year.

Help entrepreneurs and small businesses get access to capital, grow and hire by expanding Small Business Administration backed loan limits, cutting red tape and reforming our patent system. 


Putting Workers Back On The Job While Rebuilding And Modernizing America

Offering tax credits to encourage businesses to hire unemployed veterans. Businesses that hire veterans who have been unemployed six months or longer would receive a tax credit up to $5,600, and that credit rises to $9,600 for veterans who also have service-connected disabilities.

Preventing up to 280,000 teacher layoffs, and keeping first responders including firefighters and police officers on the job.

Modernizing at least 35,000 public schools across the country, supporting new science labs, Internet- ready classrooms and school renovations in both rural and urban communities, putting hundreds of thousands of Americans back to work.

Making immediate investments in infrastructure, modernizing our roads, railways and airports, putting hundreds of thousands of workers back on the job.

Project Rebuild: an effort to put people back to work rehabilitating homes and businesses and stabilizing communities, leveraging private capital and scaling up successful models of public-private collaboration.

Expanding wireless internet access to 98 percent of Americans and first responders by freeing up the nation’s spectrum. 



Pathways Back To Working For Americans Looking For Jobs

The most innovative reform to the unemployment insurance program in 40 years: As part of an extension of unemployment insurance to prevent 5 million Americans looking for work from losing their benefits, the President’s plan includes innovative work-based reforms to prevent layoffs and give states greater flexibility to use UI funds to best support job-seekers and connect them to work, including:

  • Work Sharing: UI for workers whose employers choose work-sharing over layoffs
  • Improved reemployment services for the long-term unemployed through counseling, and eligibility assessments.
  • A new “Bridge to Work” program: The plan builds on and improves innovative state programs where those displaced take temporary, voluntary work or pursue on-the-job training.
  • Innovative entrepreneurship and wage insurance programs: States will also be empowered to implement wage insurance to help reemploy older workers and create programs that make it easier for unemployed workers to start their own businesses.

A $4,000 tax credit to employers for hiring long-term unemployed workers.

Prohibiting employers from discriminating against unemployed workers when hiring.

Expanding job opportunities for low-income youth and adults by investing in promising and proven strategies and programs like summer jobs and sector-based training programs.

Tax Relief For 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 year to cut workers payroll taxes in half in 2012 – providing a $1,500 tax cut to the typical American family, without negatively impacting the Social Security Trust Fund.

Allowing more Americans to refinance their mortgages at today’s near 4 percent interest rates, which can put more than $2,000 a year in a family’s pocket. 

Fully Paid For As Part Of The President's Long-Term Deficit Reduction Plan

To ensure that the American Jobs Act is fully paid for, the President has called on the Joint Congressional Committee to achieve 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 the Committee can achieve the additional deficit reduction necessary to meet the President’s goal of stabilizing our debt as a share of the economy and pay for his plan to put Americans back to work.

Remarks by the President on Extending Tax Cuts for Middle-Class Families

THE PRESIDENT:  Thank you.  (Applause.)  Thank you very much.  Everybody, have a seat.  Have a seat.  Good afternoon, everybody.  I’m glad things have cooled off a little bit.  I know folks were hot.  (Laughter.)  

We’re here today to talk about taxes -- something that everybody obviously cares deeply about.  And I’ve often said that our biggest challenge right now isn’t just to reclaim all the jobs that we lost to the recession -- it’s to reclaim the security that so many middle-class Americans have lost over the past decade.  Our core mission as an administration and as a country has to be, yes, putting people back to work, but also rebuilding an economy where that work pays off -- an economy in which everybody can have the confidence that if you work hard, you can get ahead. 

What’s holding us back from meeting these challenges, it’s not a lack of plans, it’s not a lack of ideas -- it is a stalemate in this town, in Washington, between two very different views about which direction we should go in as a country.  And nowhere is that stalemate more pronounced than on the issue of taxes.

Many members of the other party believe that prosperity comes from the top down, so that if we spend trillions more on tax cuts for the wealthiest Americans, that that will somehow unleash jobs and economic growth.

I disagree.  I think they’re wrong.  I believe our prosperity has always come from an economy that’s built on a strong and growing middle class -- one that can afford to buy the products that our businesses sell; a middle class that can own homes, and send their kids to college, and save enough to retire on.  That’s why I’ve cut middle-class taxes every year that I’ve been President -- by $3,600 for the typical middle-class family.  Let me repeat:  Since I’ve been in office, we’ve cut taxes for the typical middle-class family by $3,600.  (Applause.)

I wanted to repeat that because sometimes there’s a little misinformation out there -- (laughter) -- and folks get confused about it. 

Moreover, we’ve tried it their way.  It didn’t work.  At the beginning of the last decade, Congress passed trillions of dollars in tax cuts that benefited the wealthiest Americans more than anybody else.  And we were told that it would lead to more jobs and higher incomes for everybody, and that prosperity would start at the top but then trickle down. 

And what happened?  The wealthy got wealthier, but most Americans struggled.  Instead of creating more jobs, we had the slowest job growth in half a century.  Instead of widespread prosperity, the typical family saw its income fall.  And in just a few years, we went from record surpluses under Bill Clinton to record deficits that we are now still struggling to pay off today.

So we don’t need more top-down economics.  We’ve tried that theory.  We’ve seen what happens.  We can’t afford to go back to it.  We need policies that grow and strengthen the middle class -- policies that help create jobs, that make education and training more affordable, that encourage businesses to start up and create jobs right here in the United States.

So that’s why I believe it’s time to let the tax cuts for the wealthiest Americans -- folks like myself -- to expire.  (Applause.)  And, by the way, I might feel differently -- because it’s not like I like to pay taxes -- (laughter) -- I might feel differently if we were still in surplus.  But we’ve got this huge deficit, and everybody agrees that we need to do something about these deficits and these debts.  So the money we’re spending on these tax cuts for the wealthy is a major driver of our deficit, a major contributor to our deficit, costing us a trillion dollars over the next decade. 

By the way, these tax cuts for the wealthiest Americans are also the tax cuts that are least likely to promote growth.  So we can’t afford to keep that up, not right now.  So I’m not proposing anything radical here.  I just believe that anybody making over $250,000 a year should go back to the income tax rates we were paying under Bill Clinton -- back when our economy created nearly 23 million new jobs, the biggest budget surplus in history, and plenty of millionaires to boot. 

And this is not just my opinion.  The American people are with me on this.  Poll after poll shows that’s the case.  And there are plenty of patriotic and very successful, very wealthy Americans who also agree, because they know that by making that kind of contribution, they’re making the country as a whole stronger.

At the same time, most people agree that we should not raise taxes on middle-class families or small businesses -- not when so many folks are just trying to get by.  Not when so many folks are still digging themselves out of the hole that was created by this Great Recession that we had, and at a time when the recovery is still fragile.  And that’s why I’m calling on Congress to extend the tax cuts for the 98 percent of Americans who make less than $250,000 for another year.  (Applause.) 

If Congress doesn’t do this, millions of American families -- including these good-looking people behind me -- (laughter) -- could see their taxes go up by $2,200 starting on January 1st of next year.  And that would be a big blow to working families, and it would be a drag on the entire economy.

Now, we can already anticipate -- we know what those who are opposed to letting the high-end tax cuts expire will say.  They’ll say that we can’t tax “job creators.”  And they'll try to explain how this would be bad for small businesses. 

Let me tell you, the folks who create most new jobs in America are America’s small business owners.  And I've cut taxes for small business owners 18 times since I've been in office.  (Applause.)  I’ve also asked Congress repeatedly to pass new tax cuts for entrepreneurs who hired new workers and raised their workers’ wages. 

But here's the thing that you have to remember.  The proposal I make today would extend these tax cuts for 97 percent of all small business owners in America.  In other words, 97 percent of small businesses fall under the $250,000 threshold.  (Applause.)  So this isn’t about taxing job creators, this is about helping job creators.  I want to give them relief.  I want to give those 97 percent a sense of permanence.

I believe we should be able to come together and get this done.  While I disagree on extending tax cuts for the wealthy, because we just can’t afford them, I recognize that not everybody agrees with me on this.  On the other hand, we all say we agree that we should extend the tax cuts for 98 percent of the American people.  Everybody says that.  The Republicans say they don't want to raise taxes on the middle class.  I don't want to raise taxes on the middle class.

So we should all agree to extend the tax cuts for the middle class.  Let's agree to do what we agree on.  Right?  (Applause.)  That’s what compromise is all about.  Let’s not hold the vast majority of Americans and our entire economy hostage while we debate the merits of another tax cut for the wealthy.  We can have that debate.  (Applause.)  We can have that debate, but let's not hold up working on the thing that we already agree on.

In many ways, the fate of the tax cut for the wealthiest Americans will be decided by the outcome of the next election.  My opponent will fight to keep them in place.  I will fight to end them.  But that argument shouldn’t threaten you.  It shouldn’t threaten the 98 percent of Americans who just want to know that their taxes won’t go up next year. 

Middle-class families and small business owners, they deserve that guarantee.  They deserve that certainty.  It will be good for the economy and it will be good for you.  And we should give you that certainty now.  We should do it now.  It will be good for you.  It will be good for the economy as a whole.  (Applause.)

So my message to Congress is this:  Pass a bill extending the tax cuts for the middle class; I will sign it tomorrow.  Pass it next week; I’ll sign it next week.  Pass it next -- well, you get the idea.  (Laughter.)

As soon as that gets done, we can continue to have a debate about whether it’s a good idea to also extend the tax cuts for the wealthiest Americans.  I’ll have one position.  The other side will have another.  And we’ll have that debate, and the American people can listen to that debate.

And then next year, once the election is over, things have calmed down a little bit, based on what the American people have said and how they’ve spoken during that election, we’ll be in a good position to decide how to reform our entire tax code in a simple way that lowers rates and helps our economy grow, and brings down our deficit -- because that’s something that we’re going to have to do for the long term.

But right now, our top priority has to be giving middle-class families and small businesses the security they deserve.  You’re the ones who are driving this recovery forward.  (Applause.)  You’re the ones who are driving this recovery forward, and I think it’s time to widen the circle of opportunity and help more Americans who work hard to get ahead.  It’s time that we learned the lessons of our past and lay the foundation for a better future.  That’s what I’m focused on every day, and I hope Congress will join me in doing the right thing.

So thank you very much, you all, for being here.  Thank you.  (Applause.)

Extending Middle Class Tax Cuts for 98% of Americans and 97% of Small Businesses

Today the President called on Congress to extend the middle class tax cuts for the 98 percent of Americans making less than $250,000 for another year. In fact, the President’s proposal extends tax cuts for 97 percent of all small business owners in America.  If Congress fails to act, a typical middle-class family of four will see its taxes go up by $2,200, and America’s small business owners would take a big hit. The President refuses to let that happen.

This should be one of those rare moments where everyone in Washington can agree. Independent experts, economists, and folks on both side of the aisle agree that we should extend tax cuts for middle class families. But so far, Congress hasn’t been able to extend middle class tax cuts because Republicans in Washington refuse to ask the wealthy and big corporations to pay their fair share. In fact, on every issue – from reducing the deficit in a balanced way to paying for investments in education – Republican insistence on cutting taxes for millionaires and billionaires has been the major cause of gridlock in Washington.

So, we look forward to a debate on tax cuts for the wealthy, but right now Congress should act to give middle class families the certainty and security of knowing their taxes won’t go up in six months.

As the President said, if Congress passes a bill extending the tax cuts for the middle class, he’ll sign it tomorrow. It’s time for Congress to get to work.

Unfortunately, Republicans continue to push their tired, false claims to distort and distract the American people.  We’ve already heard some folks opposing this proposal -- claiming we’re trying to tax “job creators.”  The fact is, the people who create most new jobs in America are America’s small business owners.  The President has cut taxes for small business owners 18 times. Even using an overly broad definition of who is a small business owner (a definition that includes passive investors and highly compensated lawyers and hedge fund managers), today’s proposal will extend all of the 2001 and 2003 tax cuts for 97 percent of all small business owners. 

If Republicans in Congress want to act to help small businesses across the country, they should vote for the proposals the President proposed that the Senate is considering this week that include new incentives to help our nation’s small businesses grow and hire and strengthen our economy. 

Countering Claims That The President’s Tax Proposals Would Hit Small Business

  • First, even under the GOP’s own flawed definition of small business, approximately 97% of taxpayers with small business income would be completely unaffected by the President’s plan: According to estimates by Tax Policy Center, about 97% of taxpayers reporting business income would not be impacted by the President’s tax proposals -- which only affect those earning over $250,000.  This has been confirmed by the independent Congressional Research Service, which concluded that “only a small fraction of businesses will be affected [by allowing the temporary income tax cuts to expire for people earning over $250,000 a year], around 2% to 3%.” 
  • Second, what Congressional Republicans Define as “Small Businesses” Include Millionaires and Billionaires, Law Partners, Hedge Fund Managers, and Passive Investors. Congressional Republicans define as small businesses any individual who receives “small business income”. Under this definition:
    • Over half of the 400 Highest Earners in the United States Would Be “Small Businesses”: According to IRS data, in 2009, among the 400 taxpayers with the highest adjusted gross income – group that averages over $200 million each in taxable income – at least 237 would have qualified as “small businesses” under this definition.
    • Hedge Fund Managers and Law Firm Partners are “Small Businesses”: It counts any type of partnership income, proprietor income, or S corporation income as “small business” income. That includes:
      • income received by partners in law firms – each and every one of whom would be considered a “small business” under this definition
      • income received by partners in hedge funds – each and every one of whom would be considered a “small business” under this definition
      • passive income on investments
      • income from renting out a property like a vacation home.
    • This is why, last time Republican Congressional Leaders tried this argument they couldn’t produce one so called “small business job creator.” Last fall, when the GOP was blocking measures of the American Jobs Act that could have supported over a million additional jobs; they argued that asking millionaires and billionaires to pay their fair share would hurt “small business job creators.”  But after pressed by independent media outlets such as National Public Radio, Republicans in Congress and their wealthy allies could not produce a single millionaire job creator for NPR to interview. [LINK]
  • Third, in contrast to the President’s small business proposals, which would encourage and directly reward new hiring and investment, the GOP’s so called “small business” tax proposal could actually discourage firms from creating jobs or making new investments this year, while giving away tens of billions of dollars to millionaires and billionaires. The legislation sponsored by Majority Leader Cantor and passed by the House of Representatives provides across-the-board tax cuts (a 20 percent deduction) on qualified “small business” income for firms with fewer than 500 workers – including well-compensated hedge fund managers and law firm partners, and even to companies that are actively laying off workers or cutting wages.
    • In some cases this proposal actually encourages postponing new hires and investments. Because new employees and expenses are deducted from this year’s taxable income, for some companies the decision to expand payrolls and invest in their businesses can actually translate into their receiving a smaller tax benefit under the Republican’s proposal.
    • In addition, the benefits are dramatically skewed - half of the $46 billion cost goes to those making more than $1 million, translating into an average tax cut of $45,000 for those millionaires.
    • The biggest beneficiaries are not small businesses making investments and creating jobs, but rather the very wealthiest Americans - like law partners and investment managers, the so called “small business job creators” Republicans in Congress claim would be hurt by the President’s position.
  • President Obama, building on a record of the 18 small business tax cuts he already has signed into law, has a plan to help 2 million actual small businesses hire workers and make new investments. The President has called on Congress to pass legislation that gives a 10 percent income tax credit for firms that create new jobs or increase wages in 2012 and that extends 100 percent expensing in 2012 for all businesses.
    • Encourage an additional $200 billion to $300 billion in new wages and jobs this year with a Small Business Jobs and Wages Tax Credit:
      • Credit for New Wages:  The plan would provide firms with a 10 percent income tax credit for new wages added in 2012. This would encourage both new hiring and providing raises to existing workers. The credit would be limited to $500,000 per firm in order to focus the benefit on actual small businesses. 
      • Focused on Middle Class Workers: Because the credit is based on the Social Security wage base, companies would receive no credit for increasing wages above $110,100. Unlike the House Republican proposal, the President’s proposal ensures that companies that offer raises only to already well-paid executives would be ineligible for the tax relief. 
      • Directly tied to new hires and pay increases:  Because the credit is tied to increases in payroll, the benefit is only available only to companies that make new hires or offer employee pay-raises – directly encouraging growth and jumpstarting hiring. This stands in contrast to proposals put forward by Congressional Republicans that would cut taxes of hedge fund managers, law partners and many of the wealthiest Americans regardless of whether they employed or hired a single worker.
      • Helps 2 million Small Businesses: This credit would help nearly 2 million actual small businesses with employees.
      • More than $20 billion in tax relief to encourage an additional $200 to $300 million in new wages and jobs: The President’s plan will provide more than $20 billion in direct tax relief targeted to small businesses in 2012 and 2013, according to a score from the independent, non-partisan Joint Committee on Taxation. This $20 billion in direct tax relief could encourage an additional $200 billion to $300 billion in new wages and jobs this year. 
  • Support business investment this year with 100 percent expensing for 2012:  The President is proposing an extension of the 100 percent expensing provision that he signed into law in December 2010, which rewards firms for making investments by allowing them to deduct the full value of those investments through 2012. Extending 100 percent expensing for an additional year would put an additional $50 billion in the hands of businesses in 2012 and 2013. Most of this relief would be recouped by the Treasury as businesses regain their strength.
    • What Others Have Said About Expensing:
      • The National Federation of Independent Business called expensing a “big victory” for small business: “Bottom line – just about every small business can write-off the full amount of investments they want to make in 2010 and 2011.” (December 2010).

In a 2010 letter signed by the U.S. Chamber of Commerce, more than 80 business groups – representing industries from aerospace and wireless to builders, contractors, and retail stores – wrote that “bringing back bonus depreciation will encourage companies of all sizes to invest in newer, more efficient, and more environmentally-friendly equipment, which will help large and small businesses alike.” 

 President Obama's Plan for Small Business Tax Cuts Compared to the House Republican Plan

 

 

President Obama's Plan

 

House Republican Plan

 
 

Targeting small business

Targets relief to 2 million real small businesses with employees

 

 

Biggest beneficiaries are not small businesses employing workers, but the wealthiest Americans - like law partners and investment managers

 

Who it helps

Focused on middle-class workers, because the credit doesn't apply to wages above $110,100.

 

 

The benefits are dramatically skewed - half of the $46 billion cost goes to those making more than $1 million

 

Jobs and growth

Provides a direct incentive to hire new workers

 

 

In some cases actually encourages postponing newhires and investments, since new employees and expenses are deducted from taxable income, and some companies get a smaller benefit for expanding their payrolls and investing in their businesses.

Small Business Health Care Tax Credit

Health reform legislation signed by President Obama includes a Small Business Health Care Tax Credit to help small businesses afford the cost of covering their workers. See how the Small Business Health Care Tax Credit might affect four hypothetical small businesses.

Key Facts about the Small Business Health Care Tax Credit

  • The tax credit, which is effective immediately, can cover up to 35 percent of the premiums a small business pays to cover its workers. In 2014, the rate will increase to 50 percent.
  • The Congressional Budget Office estimates that the tax credit will save small businesses $40 billion by 2019.
  • Both small for-profit businesses and small not-for-profit organizations are eligible.

Key Elements

  • Available Immediately. The credit is effective January 1, 2010. As a result, small businesses that provide health care for their workers will receive immediate help with their premium costs, and additional firms that initiate coverage this year will get a tax cut as well.
  • Broad Eligibility. The Council of Economic Advisors estimates that 4 million small businesses are eligible for the credit if they provide health care to their workers. Qualifying firms must have less than the equivalent of 25 full-time workers (e.g., a firm with fewer than 50 half-time workers would be eligible), pay average annual wages below $50,000, and cover at least 50 percent of the cost of health care coverage for their workers.
  • Substantial Benefit. The credit is worth up to 35 percent of a small business’s premium costs in 2010. On January 1, 2014, this rate increases to 50 percent.
  • Non-Profits Eligible. Tax-exempt organizations are eligible for a 25 percent tax credit in 2010. In 2014, this rate increases to 35 percent. (The credit rates are lower for non-profits to ensure that the value of the credit is approximately equal to that provided to for-profit firms that cannot claim a tax deduction for the amount of the credit claimed.)
  • Gradual Phase-Outs. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.
  • Premium Cost Eligibility. To avoid an incentive to choose a high-cost plan, an employer’s eligible contribution is limited to the average cost of health insurance in that state.

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Reforming the Tax Code

The tax code has become increasingly complicated and unfair.  Under today’s tax laws, those who can afford expert advice can avoid paying their fair share and interests with the most connected lobbyists can get exemptions and special treatment written into our tax code.  While many of the tax incentives serve important purposes, taken together the tax expenditures in the law are inefficient, unfair, duplicative, or even unnecessary.  In fact, because our corporate tax system is so riddled with special interest loopholes, our system has one of the highest statutory tax rates among developed countries to generate about the same amount of corporate tax revenue as our developed country partners as a share of our economy; this, in turn, hurts our competitiveness in the world economy.

That is why the President is calling on the Congress to enact comprehensive tax reform that meets the following five principles:

To begin the national conversation about tax reform, the President has offered a detailed set of tax loophole closers and measures to broaden the tax base that.  These measures include: cutting tax preferences for high-income households; eliminating special tax breaks for oil and gas companies; closing the carried interest loophole for investment fund managers; and eliminating benefits for those who buy corporate jets.

Tax reform should draw on these items, together with the elimination of additional inefficient tax breaks, to finance the reduction of marginal rates and meet the President’s other tax principles, including the Buffett Rule.  In the absence of fundamental tax reform, the President believes these measures should be enacted on a standalone basis, along with permanent extension of the middle class 2001 and 2003 tax cuts.  This would be an important step toward a tax system that is consistent with the President’s principles.

  1. Lower tax rates.
    The tax system should be simplified and work for all Americans with lower individual and corporate tax rates and fewer brackets.
  2. Cut inefficient and unfair tax breaks.
    Cut tax breaks that are inefficient, unfair, or both so that the American people and businesses spend less time and less money each year filing taxes and cannot avoid their responsibility by gaming the system.
  3. Cut the deficit.
    Cut the deficit by $1.5 trillion over the next decade through tax reform, including the expiration of tax cuts for single taxpayers making over $200,000 and married couples making over $250,000.
  4. Increase job creation and growth in the United States.
    Make America stronger at home and more competitive globally by increasing the incentive to work and invest in the United States.
  5. Observe the Buffett Rule.
    As multi-billionaire Warren Buffet has pointed out, his average tax rate is lower than his secretary’s.  No household making over $1 million annually should pay a smaller share of their total income in taxes than middle-class families. This rule will be achieved as part of overall reform that increases the progressivity of the tax code.

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