Topic: American Jobs Act
Weekly Quick Hits: FY 2013 Budget Edition
Fiscal Year 2013 Budget – This week, President Obama released his Budget for Fiscal Year 2013. (Whitehouse.gov)
Budget Alarms Market – President Obama’s $3.8 trillion fiscal 2013 budget alarmed the muni market by proposing to reduce the value of tax-exempt interest and other tax preferences to 28%. But the budget does include a proposal to resurrect and expand the popular Build America Bond program. (The Bond Buyer)
Obama’s Budget: Govt Still Growing Despite Cuts – The $3.8 trillion election-year budget plan calls for stimulus-style spending on roads and schools and tax hikes on the wealthy to help pay the costs, but does little to reduce government or rein in Medicare and Medicaid. (Boston Globe)
Tax Credit Revived in Budget Proposal – An important note for the public finance community is that the budget extends and modifies the new markets tax credit (NMTC) program. Specifically, the proposal would extend the NMTC through 2013, with an allocation amount of $5 billion. It also revives the Section 1603 Tax Credit for solar projects. (Greentechmedia.com)
Senate Passes Part of Obama’s Jobs Plan
On the eve of Veteran’s Day, the Senate voted to approve a portion of President Obama’s revised jobs plan. The package approved includes a proposal to give companies tax credits for hiring unemployed veterans. With the jobless rate among veterans of the Iraq and Afghanistan wars in double digits, the plan passed 94-1.
Democrats further smoothed the offer by dropping the proposed millionaire’s tax to pay for the package. Instead, the nearly $2 billion cost will be covered by extending a Veterans Administration loan fee, as proposed in the House bill.
View a state-by-state guide of the American Jobs Act here.
Take 2: Rebuild America Jobs Act
With the failure of the American Jobs Act to cross the finish line in the U.S. Senate, Senate Democrats have introduced another bill called the “Rebuild America Jobs Act” (RAJA). This $60 billion bill focuses on the infrastructure projects in the American Jobs Act and charges a surtax on millionaires to pay for those projects.
Under RAJA, $50 billion would be used for needed infrastructure, such as highways, transit systems, railroads and airports. These funds would be in addition to the amounts set forth in the surface transportation bill working its way through Congress.
In addition, RAJA would spend $10 billion in seed money for a national infrastructure bank, which would have the power to loan funds to states or private entities in order to foster public-private partnerships for infrastructure projects.
Funding for RAJA would come from a 0.7% surtax on adjusted gross income over $1 million, starting in 2013. According to Transportation Secretary Ray LaHood, this legislation would create roughly 800,000 jobs at a cost of $75,000 per job.
American Jobs Act Can’t Find Footing
The American Jobs Act, introduced by President Obama in September 2011, was defeated 50-49 by the US Senate earlier this week. The Senate vote ends the possibility of the bill being adopted as a unified package. Senate Democrats are currently deconstructing the bill, hoping to pass discrete portions of the proposal. The provisions with the best chances of passage include a payroll tax reduction and a requirement for free trade agreements with South Korea, Columbia and Panama.
In response to the Senate’s no vote, the President admonished the GOP for not presenting its own plan for job creation.
Weekly Quick Hits
CA Governor Signs Bills to Speed #FarmersField – Last Tuesday, California Governor Jerry Brown signed into law SB 292 and SB 290, which limit environmental lawsuits and accelerate litigation review. The bills are expected to help facilitate the Los Angeles NFL stadium project. (Los Angeles Times)
$4.75 Billion in Solar Loans Closed – On the final day of eligibility under the Stimulus Act, the U.S. Energy Department approved $4.75 billion in loan guarantees for four solar energy projects. (Bloomberg)
House GOP Changes Approach to Infrastructure – House Republicans abandoned plans to slash U.S. infrastructure spending. Instead House Transportation Committee Chairman John Mica is working on a 6-year plan that would maintain existing funding levels for highway and mass-transit constructi0n. (Wall Street Journal)
Senator Kirk Capitalizes on Lincoln Legacy in Illinois – U.S. Senator Mark Kirk is leading in Illinois with his “infrastructure investment equals job creation message” embodied in his Lincoln Legacy Infrastructure Development Act. (The Courier-News)
Proposal to Revive Build America Bonds for Infrastructure Construction
President Obama has proposed his American Jobs Act, and the Republicans in Congress are expected to offer their own plan to jump start the economy. David Kotok, Chairman and Chief Investment Officer of Cumberland Advisors, has proposed a third option: revival of the Build America Bonds (BABs) program. The legislative authorization for BABs expired on December 31, 2010. However, as Mr. Kotok notes in a recent article, the BABs program was hugely successful. By using BABs to finance shovel-ready infrastructure construction, Mr. Kotok believes that municipalities could put thousands of people back to work in short order.
Mr. Kotok’s article may be viewed here.
President Obama’s Deficit Reduction Approach
On Monday, President Obama introduced his plan to cut the national debt by $3 trillion and to pay for the $500 billion American Jobs Act. The President proposed both revenue raising and deficit reduction measures, with the central theme of raising taxes on high-income individuals and corporations.
Revenue Raising
- $800B - realized by letting some of the Bush-era tax cuts expire for high-income households
- $400B – from capping the value of itemized deductions and other exemptions for high-income households
- $300B – from closing various tax loopholes.
Deficit Reduction
- $248B – stemming from Medicare cuts
- $72B – saved by making cuts to Medicaid and other health program
- $250B – gained from cuts in other programs, including federal worker benefit programs and farm subsidies
Lastly, the Obama administration is counting on additional reductions on spending in Iraq and Afghanistan.
Weekly Quick Hits
Deficit Reduction Plan – Monday morning, President Obama is expected to unveil his deficit reduction plan, which is anticipated to include entitlement cuts, tax increases and war savings to reduce government spending by more than $3 trillion over the next 10 years. (New York Times)
American Jobs Act Could Crimp Muni Market – Speaking at The Bond Buyer California Public Finance Conference, California Treasurer Bill Lockyer said the American Jobs Act threatens to raise borrowing costs for municipal bond issuers by eliminating certain tax exemptions for interest on those bonds. (Wall Street Journal)
Fall-Out from Solyndra – After the announced bankruptcy of Solyndra, the solar panel manufacturer that obtained a $535 million federal loan, the White House has spent significant time answering questions about its relationship with the company. (The Washington Post)
California Coastal Clean-Up Day – In an annual tradition, over 10,000 volunteers collected 44,038 tons of trash from California beaches. (Los Angeles Times)
Impact of American Jobs Act on Tax-Exempt Market
The American Jobs Act proposes to cap tax-exempt interest for higher income taxpayers. Whether or not the Jobs Bill makes it through Congress, many see the move as a bellwether for tax reform and deficit reduction strategies. The bill, which Obama sent to Congress Monday, would limit the tax value of tax-exempt interest from muni bonds, other expenditures and deductions to 28% for all individuals with $200,000 or more of taxable income and married couples with $250,000 or more. It would apply to taxable years beginning on or after Jan. 1, 2013. There would be no grandfathering for the tax-exempt bonds investors now hold.
The proposal set off a firestorm in the tax-exempt bond world.
Weekly Quick Hits
Stimulus 2.0? – Editorial on President Obama’s American Jobs Act. (US News and World Report)
The Impact of Federal Investment on Rural Jobs – The U.S. Department of Agriculture claims that it has invested more than $6.2 billion since 2009 to help nearly 10,000 small and emerging rural businesses expand, creating or saving more than 250,000 jobs. But the actual impact of such federal investment is unclear. (New York Times)
Behind the Green Jobs Numbers – A discussion of the benefits and costs of green jobs and how investing in them may help stimulate the economy. (New York Times)
Subway to the Sea Makes Progress – The Los Angeles County Metropolitan Transporation Authority began construction on Monday, September 12, 2011, on the second phase of the Expo line which will run from Culver City to Santa Monica. (Los Angeles Times)
