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The Middle Class Tax Relief and Job Creation Act

Posted By David S. Addington On December 12, 2011 @ 2:41 pm In Economics | Comments Disabled

On Friday, December 9, 2011, Representative Dave Camp (R-MI), with several cosponsors, introduced H.R. 3630, the “Middle Class Tax Relief and Job Creation Act of 2011.”  The 369-page bill consists of six titles, main elements of which are discussed below.

Title I of the bill gets the government out of the way of a pipeline project so the private sector can create some jobs.  The bill provides a mechanism for prompt approval of the Keystone XL pipeline project [1], to allow oil to flow from Alberta, Canada to U.S. gulf coast ports and in the process improve America’s energy security, create thousands of jobs, and generate deficit-reducing revenues for the federal government and a number of states.  While Congress should simply have exercised its constitutional power to regulate foreign commerce and directly authorized the project to proceed, establishment of the accelerated approval mechanism helps.  Title I of the bill also forces the Environmental Protection Agency (EPA), in issuing new rules governing commercial and industrial boilers [2], to allow reasonable time for development and implementation of the rules.  In addition, Title I of the bill encourages job-creating investment by extending for another year the option for immediate tax deductibility of certain capital asset purchases.

Title II of the bill extends for a year the employee payroll tax reduction.  Such an extension prevents a tax hike, leaving more of the people’s hard-earned money in their own pockets, and therefore does not give rise to a budgetary need to “pay for” money that is simply left where it originates.  Title II also extends the unemployment compensation program, but with appropriate reforms to help the unemployed find jobs and to begin to tailor the overall program to changes in the economy.  Title II extends for two years the forestalling of sudden automatic cuts in Medicare payments to physicians that would otherwise occur under the law (often called the “Doc Fix”).  The bill also extends for a year the Temporary Assistance to Needy Families program, one of the 70 federal welfare programs in need of integrated reform [3] (see H.R. 1167 [4]/S. 1904 [5]).

Title III of the bill contains reforms to the federal flood insurance program that previously passed the House of Representatives on a bipartisan basis.  Among other things, the bill adjusts the financing of the program to improve its actuarial soundness.

Title IV of the bill addresses the use of spectrum for communications purposes, including public safety purposes.  Although a market-oriented approach to allocating public spectrum for public safety users would encourage efficient use of spectrum more than the bill’s approach of allocating dedicated spectrum to them, the bill uses market mechanisms to good effect in many of the other spectrum-related provisions.

Title V of the bill takes some action to reduce the increase in the federal deficit [6].  The bill increases the mortgage guarantee fee Fannie Mae and Freddie Mac charge for taking on the credit risk of loans they purchase in the secondary mortgage market.  The increase is a small step in the needed process for eliminating Fannie Mae and Freddie Mac [7] and restoring a competitive mortgage market to the private sector.  Title V takes a small step — small in comparison to the scope of the Medicare reforms needed [8] but in the right direction — to adjust the Medicare program.  Perhaps most importantly, the bill recognizes a new Medicare principle that, if the Government continues to subsidize premiums for Medicare beneficiaries, only those beneficiaries who have an economic need for the subsidy should receive it; thus, the bill increases the Medicare premiums paid by high-income beneficiaries, an element of the Heritage plan for Saving the American Dream [9].  Title V of the bill also increases over time the amounts that Members of Congress and federal employees pay into their retirement programs and adjusts the basis on which the programs calculates retirement benefits. In addition, Title V reduces federal spending by eliminating for 2013 cost of living adjustments for Members of Congress and the federal civilian workforce.  In the category of minor oddities, Title V imposes a 100% tax on excess unemployment compensation paid to millionaires; it would seem more appropriate for Congress to prevent receipt or require return of benefits, rather than imposing a tax to recover the funds.

Title VI of the bill makes technical changes to payment of corporate estimated tax, timing of certain fee payments in international trade, Senate procedure, and budget-scoring of the legislation after enactment.

The Congressional Budget Office reported [10] that “enacting H.R. 3630 would change revenues and direct spending to produce increases in the deficit of $166.8 billion in fiscal year 2012 and $25.3 billion over the 2012-2021 period.”

The House of Representatives is expected to consider H.R. 3630 soon this week.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2011/12/12/the-middle-class-tax-relief-and-job-creation-act/

URLs in this post:

[1] Keystone XL pipeline project: http://blog.heritage.orglink to http://blog.heritage.org/2011/11/10/obama-delays-keystone-pipeline-delays-jobs-and-energy-too/?query=Obama+Delays+Keystone+Pipeline:+Delays+Jobs+and+Energy+Too

[2] rules governing commercial and industrial boilers: http://www.heritage.org/research/reports/2011/05/epas-boiler-mact-rules-still-a-threat?query=EPA’s+Boiler+MACT+Rules+Still+a+Threat

[3] welfare programs in need of integrated reform: http://www.heritage.org/research/commentary/2010/07/its-time-for-another-run-at-welfare-reform

[4] H.R. 1167: http://www.gpo.gov/fdsys/pkg/BILLS-112hr1167ih/pdf/BILLS-112hr1167ih.pdf

[5] S. 1904: http://www.gpo.gov/fdsys/pkg/BILLS-112s1904is/pdf/BILLS-112s1904is.pdf

[6] reduce the increase in the federal deficit: http://blog.heritage.org/2011/11/21/congress-you-must-still-do-your-job-supercommittee-or-not/?query=Congress:+You+Must+Still+Do+Your+Job+Supercommittee+or+Not

[7] eliminating Fannie Mae and Freddie Mac: https://thf_media.s3.amazonaws.com/2011/pdf/bg2577.pdf

[8] Medicare reforms needed: http://www.heritage.org/research/reports/2011/10/the-first-stage-of-medicare-reform-fixing-the-current-program

[9] Saving the American Dream: http://www.savingthedream.org/about-the-plan/plan-details/SavAmerDream.pdf

[10] Congressional Budget Office reported: http://www.cbo.gov/ftpdocs/126xx/doc12609/hr3630.pdf

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