When the Obama administration rolled out the much-anticipated American Jobs Act (S. 1549) on Sept. 12, 2011, the $447 billion proposal presented the classic good news/bad news scenario to HR professionals and their organizations.
While the legislation focuses on overall job creation, the president’s proposal includes several provisions that would affect how HR professionals do their jobs. According to sources familiar with the issues, some of the HR-related provisions would offer some relief from costly payroll taxes and provide increased and new tax credits for hiring the long-term unemployed and veterans. However, some other provisions could create administrative burdens and pose challenges for HR practitioners and their employers. President Barack Obama is pushing hard for passage of the bill, claiming that the jobs package “is made up of the kinds of proposals long supported by both Republicans and Democrats.”
“The purpose of the American Jobs Act of 2011 is simple—put more people back to work and put more money in the pockets of working Americans,” the president said in a letter to Congress. “And it will do so without adding a dime to the deficit.”
Effort to Hire More Vets
Under existing law, employers that hire veterans who have been disabled in the line of duty and unemployed for at least six months are eligible for a maximum tax credit of $4,800 per hire. The president’s proposal would increase the “wounded warrior” credit to $9,600 and create two tax credits. Employers would receive a $2,400 credit for hiring veterans who have been unemployed for at least four weeks and a $5,600 credit for veterans who have been unemployed for at least six months.
The jobs package would extend and expand an existing temporary reduction in payroll taxes for individual employees and their employers. The proposal would extend, through the end of 2012, a 2 percent reduction in Social Security payroll taxes paid by individuals and would increase the tax cut by 1.1 percentage points.
In addition, the portion of Social Security taxes paid by employers would be cut in half, from 6.2 percent to 3.1 percent. The employer payroll tax reduction would apply to the first $5 million of wages paid. The payroll tax reduction would not be available to federal, state and municipal government employers—except for state-owned colleges and universities. Employers and business groups, including the U.S. Chamber of Commerce and the National Federation of Independent Business (NFIB), praised the administration’s proposal to boost the hiring of U.S. veterans and ease the payroll tax burdens of individuals and companies. While business leaders and employer advocacy groups support passage of the tax credits and payroll tax reductions, they have voiced concerns and would most likely oppose other HR-related provisions in the jobs package.
The bill includes a provision that would prohibit employers from discriminating against unemployed job applicants. The discrimination provision is similar to the proposed Fair Employment Opportunity Act of 2011 (H.R. 2051), which was introduced in Congress in July 2011. The proposal would make it illegal for employers to discriminate against unemployed job applicants and would provide whistle-blower and retaliation protections to employees and applicants who complain about discriminatory practices. The discrimination provision would apply to organizations with 15 or more employees and to all employment agencies.
No New Mandates
Officials with business groups such as the U.S. Chamber, NFIB and the Society for Human Resource Management agree that employers should not discriminate against unemployed applicants. However, many business leaders and employer groups strongly oppose placing any additional employment mandates on businesses. Critics of the provision claim that new mandates could hinder hiring efforts and conflict with the Obama administration’s goal of reducing government red tape and eliminating burdensome federal regulations that inhibit job creation.
A Tax Increase?
Another provision tucked into the jobs package would reduce or eliminate the income tax exclusion of employer-provided health benefits for individuals who earn $200,000 or more per year and for married couples earning $250,000 or more. Congress and the White House have eyed the health benefits exclusion before as a way to increase government revenues and help to reduce deficit spending.
The idea has been opposed by employers and employee advocacy groups. Groups such as the American Benefits Council have stated that eliminating the income tax exclusion would further raise the cost of health insurance to individuals and put pressures on employers to increase wages or provide other benefits to offset reductions in employee take-home pay.
“What we would really like to see are sensible regulations and reforms that ease employer compliance with the health care reform law. Changes to rules that make it easier for employers to meet their pension and retirement plans obligations could also help to boost employment,” said James Klein, president of the American Benefits Council.
In a speech to Congress on Sept. 8, 2011, Obama pledged that the White House would consider any reforms or changes to regulations that help employers comply with the law while easing their administrative burdens.
Change to Unemployment Benefits
The president’s jobs proposal would extend unemployment benefits to the long-term unemployed (more than six months) until Jan. 3, 2012. The legislation would require the federal government to explore revamping the unemployment benefits system and possibly model it after a program run by the state of Georgia. In the Georgia program, unemployed workers are enrolled in job training programs and receive their unemployment benefits as long as they continue their training. According to sources familiar with the issue, the Georgia program has had mixed results and would face several large hurdles if implemented nationwide.
An Uphill Battle
The prospects of the president’s complete jobs proposal passing Congress aren’t good, according to observers. While Obama claims that the $447 billion package won’t add to the federal government’s growing deficit, GOP leaders in Congress are skeptical of the claim.
Republicans have balked at the jobs package’s price tag and say that they will not raise taxes to fund another economic stimulus effort by the Democrats.
“When you look at what we saw in the president’s proposal, we see permanent tax increases put into effect to pay for temporary spending,” Speaker of the House John Boehner, R-Ohio, said during a media briefing. ‘I just don’t think that is going to help our economy.”
Obama and Democratic leaders in Congress claim that the jobs bill will reduce tax burdens for employers and individuals. However critics of the president’s plan point out that the proposal would eliminate or reduce tax exclusions for high-income workers and therefore would constitute a tax increase.
Sources say the White House jobs proposal has a good chance of passing the U.S. Senate, which is controlled by Democrats. However, approval of the complete package in the House appears unlikely, but some observers say that portions of the jobs package could be approved.
Bill Leonard is a senior writer for SHRM.