President Obama presented the American Jobs Act in his address last night. Here’s what it means for small businesses.
Last night, President Barack Obama presented his long anticipated plan for creating jobs: the American Jobs Act. The plan calls for a combination of tax incentives and spending that are intended to motivate companies to hire people and raise salaries while also providing economic support to unemployed people. The price tag: nearly $450 billion.
Small businesses are a central theme of this proposal. Let’s take a closer look at what this could mean for your business.
What the job market looks like now
The job market is in terrible shape. The unemployment rate, currently at 9.1 percent, has hovered around 9 percent for well over two years. That’s nearly twice the rate that is considered healthy for our economy. Over 14 million people are now unemployed, actively looking for work and unable to find it. Over 6 million people have been without a job for at least six months. In addition to the unemployed, 8.8 million people have been forced to take part-time work because full-time work isn’t available. Another 2.6 million people want to work but are so discouraged by their prospects that they haven’t actively looked for work in a year. If we add together the people that are unemployed, underemployed and discouraged, it represents nearly one-fifth of our labor force. Yes, it’s a terrible job market.
What the President is proposing
The President’s proposal essentially calls for the following:
- 50 percent reduction in payroll taxes for the first $5 million in wages paid by small businesses.
- Temporary elimination of employer payroll taxes for small businesses on new workers hired or on raises given to existing workers.
- Extension of the 100 percent expensing of investment for company purchases of equipment.
- Tax credits ranging from $4,000 to $9,600 for businesses that hire unemployed persons.
- Investment in infrastructure projects.
- Relaxing and expanding regulations that allow unemployed persons to collect unemployment while trying to start their own business.
These broad proposals must be translated into legislative language. Anything could change during that process.