NEW YORK (MainStreet) — Thursday night President Obama introduced his $447 Billion “American Jobs Act” to a joint session of Congress, but the message was clearly directed at consumers as much as it was at lawmakers.
An estimated $240 billion of the package will be used to extend and expand the cut in Social Security taxes, and to prevent a 2% cut in pay for workers that would otherwise take effect on January 1, 2012 when a temporary tax cut is set to expire.
“You should pass this jobs plan right away," Obama said, because "there should be nothing controversial about this piece of legislation. Everything in here is the kind of proposal that's been supported by both Democrats and Republicans, including many who sit here tonight. And everything in this bill will be paid for."
However, Obama’s speech did not detail just how he would pay for the bill. That's especially important considering the tax cuts at the center of the proposal, just the latest evolution in the fallout of the disastrous tax rebate checks issued by the Bush administration.
For 2011 tax returns, only the amount of Social Security tax withheld from employees had been cut from 6.2% to 4.2%; Obama’s American Jobs Act would cut the Social Security tax in half – to 3.1% - for both employees and employers for 2012. The employer’s share of the Social Security tax would be sliced to 3.1% for the first $5 million in wages per firm, and it will be completely eliminated for wages paid to new workers. Beyond that, the tax would be eliminated for the first $50 million in raises given to current employees.
The biggest recipient of the 2% (and the proposed 3.1%) cut in the Social Security tax is, surprisingly, the family with income over $250,000 on whom Obama previously wanted to increase income taxes. A husband and wife, each earning the maximum $106,000 in Social Security-taxable wages in 2011 got an additional $4,240 in take home pay. With the new 3.1% cut this will increase to $6,572 “in pocket”.
In the end, Obama's speech attempted to address the country's jobs problem in a big way, from a number of angles, calling for a cut in payroll taxes, substantial tax credits for businesses that hire returning veterans and the long-term unemployed, extending jobless benefits to the unemployed, with special emphasis on those out of work at least six months and those in low-income neighborhoods, and aid to keep laid-off teachers and first responders in their jobs and for major school construction and infrastructure renovation.
And although he seemed confident that there is "nothing controversial" about his proposal, a deeply divided Congress will have plenty of opportunities to prove him wrong.
—For more details on the president's plan, visit MainStreet’s “Obama” topic page for our latest coverage!