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Federal Stimulus

Bipartisan Senate Jobs Bill Has Highway Trust Fund Rescue But No TIGER

Senate Finance Committee Chairman Max Baucus (D-MT) and his panel's senior Republican, Chuck Grassley (IA), today offered a job-creation proposal designed to garner enough GOP votes to overcome an anticipated filibuster.

BaucusGrassleyRoundtable.jpgSenate Finance Committee chief Max Baucus (D-MT), at left, with GOP ally Chuck Grassley (IA) at right. (Photo: Baucus Press)

The measure's transportation provisions align with a draft bill floated on Tuesday by Senate Majority Leader Harry Reid (D-NV), with the nation's highway trust fund getting a financial reprieve that would last through the end of 2010, at a cost of $19.5 billion.

The bill also would reverse last year's cancellation of $8.7 billion in contract authority for road programs, including bike-ped-centric Transportation Enhancements funding.

No official budgetary impact would be tallied from the trust fund rescue, because the transfer would be counted as a restoration of interest that the Treasury has held onto for 12 years. (For more on that historical footnote, check out this post.)

Notably absent from the Baucus-Grassley measure is any new infrastructure spending, such as the $37.3 billion plan approved by the House in December. Senate Democrats have suggested such funding might come up as part of a forthcoming jobs package, but without offsets elsewhere in the budget for such an idea, GOP opposition is almost assured.

An expansion of the merit-based grants known as TIGER (short for Transportation Investments Generating Economic Recovery) was also left out of the Finance Committee's proposal, despite strong support from the White House for extra funding for the popular program.

Baucus and Grassley did make room in their bill, with a total price tag estimated at $84 billion, for a provision allowing the conversion of tax-credit bonds for school construction and energy projects to Build America Bonds (BABs), which offer government-subsidized interest. BABs have become a favorite tool for local and state government seeking to finance new transit and road projects, but the jobs bill's conversion language does not appear to apply to transportation.

Late Update: Reid threw cold water on Baucus and Grassley's plan this afternoon, telling reporters that he would move forward with a slimmed-down bill during the week of February 22, after Congress returns from a Presidents' Day recess.

"We're going to do a bill that has four things in it," Reid said this afternoon. In addition to a payroll tax credit aimed at boosting hiring and a small business tax credit, he said, the new Democratic legislation would include "Build
America bonds, which has been so dramatically successful [and] the highway bill extension for one year, which will save a
million jobs."

A full summary of the Finance Committee's plan follows after the jump.

Job CreationProvisions

Schumer-Hatch JobsPayroll Tax Exemption.  Thisprovision would offer an exemption from social security payroll taxes for everyworker hired in 2010 that has been unemployed for at least 60 days.  Themaximum value would be equal to 6.2% of wages up to the FICA wage cap($106,800).  There would also be an additional $1,000 income tax creditfor every new employee retained for 52 weeks to be taken on theemployer’s 2011 income tax return.  This proposal is estimated tocost $13 billion over ten years.

Extension of Section179 Expensing.  Thisprovision would extend 2008 and 2009 section 179 expensing thresholds so thattaxpayers may elect to write-off up to $250,000 of certain capital expenditures(subject to a phase-out once expenditures exceed $800,000) in 2010 in lieu ofdepreciating those costs over time.  This proposal is estimated to cost$35 million over ten years.

Electionto Convert Tax Credit Bonds to Build America Bonds.  Undercurrent law, Congress provided tax credit bonds to qualifying issuers forcertain school and energy projects.  Tax credit bonds provide the bondholder a federal tax credit in lieu of interest.  Build America Bondsprovide qualifying issuers a direct payment from the Treasury for a portion ofthe interest paid on the bond for government works projects.  Thisprovision would allow qualifying issuers of tax credit bonds the option ofissuing tax credit bonds under current law, or utilizing the direct subsidyBuild America Bond structure for bonds issued after the date ofenactment.  The federal subsidy would equal 45 percent of the borrowingcost (65 percent for qualifying small issuers).  The proposal isestimated to cost approximately $2 billion over ten years.

Highway Trust Fund. This provision would extendhighway and transit programs through calendar year 2010, and transfers from theGeneral Fund to the Highway Trust Fund $19.5 billion in interest foregone since1998.  It would also halt annual payments the Highway Trust Fund makes tothe General Fund as reimbursement for tax-exempt users of the highway program(e.g. state/local fleets and transit providers).  This provision alsorepeals an $8.7 billion rescission of unobligated balances of contractauthority, a provision which passed in the 2005 SAFETEA-LU legislation. Thisproposal has no revenue effect.

Extension ofExpiring Tax Provisions

The draft HIRE Act wouldalso extend several tax provisions that expired at the end of 2009, providing muchneeded tax relief for individuals and businesses.  These provisionsinclude the research and development credit, the 15-year recovery period forleasehold, restaurant, and retail improvements, the new markets tax credit, theactive finance exception under Subpart F, and the CFC look-through rules. Thedraft HIRE Act would also extend several energy tax provisions, includingcredits for home efficiency and alternative fuel vehicles, as well as forbiodiesel, renewable diesel and other alternative fuels.  The draft billalso includes several disaster relief provisions.  The total cost ofthe extenders provisions is about $31 billion over ten years.

Pension FundingRelief

The provision would providetemporary, targeted funding relief for single employer and multiemployerpension plans that suffered significant losses in asset value due to the steepmarket slide in 2008.  The pension fundingprovisions raise about $6 billion over ten years.

Economic Safety NetProvisions

UnemploymentInsurance Extension.  Thisprovision would extend current law, including increased unemployment benefits,through May 31, 2010. Under current law, an unemployed worker may receive up to26 weeks of unemployment benefits provided by the state in which they wereemployed.  After the state-provided benefits are exhausted, the worker mayqualify for 34 more weeks of benefits provided by the federal government. If that person is unemployed in a state with an unemployment rate above 6percent, they qualify for an additional 13 weeks of benefits also provided bythe federal government.  Unemployed workers in states with an unemployment level over 8.5 percent qualify for an additional six weeks of benefits alsoprovided by the federal government.  In addition, the Federal government pays 100 percent of the cost ofstate Extended Benefits programs which provide up to 13 additional weeks ofbenefits for unemployed workers who have exhausted regular state benefits orEmergency Unemployment Compensation.  Last year’s economic recoverybill increased weekly unemployment benefits by an additional $25 perweek. Without extension, these provisions will expireon February 28, 2010.  This proposal is estimated to cost $22 billionover ten years. 

Extension of COBRAPremium Assistance. Thisprovision would extend the 65-percent COBRA premium subsidy for terminatedworkers through May 31, 2010. This provision also includes technicalclarifications to the program. The proposal is estimated to cost $3 billionover ten years.

Extension ofExpiring Health Care Provisions. 

The draft HIRE Act alsoextends health provisions, a number of which expired at the end of 2009. These provisions include a seven-month extension of the sustainable growth rateupdate formula.  Without this fix, physicians participating in Medicareface a 21 percent reduction in payments.  The bill also extends theexceptions process for Medicare therapy caps and extends payment provisions formental health providers, ambulance services, physicians in areas where the workgeographic practice cost index (GPCI) is below 1.0, certain physician pathologyservices, the rural hospital flexibility (Flex) program, improved payments foroutpatient services in hospitals in rural areas, direct billing for Indianhealth service providers, Medicare hospital wage index reclassifications underthe section 508 program, provisions concerning long-term acute care hospitalservices, and certain Medicare Advantage plans, including special needs plans,cost plans and senior housing programs. The draft bill would also provide anaccreditation exemption for certain pharmacies that furnish durable medicalequipment and would clarify eligibility for physician health informationtechnology incentive payments. And finally, the draft bill would keep the 2009federal poverty guidelines to protect people in means-tested programs fromlosing benefits and includes a provision to disregard refundable tax creditsand refunds as income for twelve months from receipt. The total cost of thehealth extenders provisions is about $10 billion over ten years.

Other Provisions

The draft bill contains fiveprovisions outside the jurisdiction of the Finance Committee.  Theseinclude short-term extensions of two expiring authorities under the PatriotAct, the national flood insurance program, and certain SBA loanprovisions.  In addition, the draft bill includes an estimated $1.5billion in agriculture disaster assistance and a five-year reauthorization ofsatellite home viewer legislation.  These provisions are estimated tocost $3 billion over ten years.

Offsets

Foreign Account TaxCompliance. These provisions include a comprehensive set ofmeasures to reduce offshore noncompliance by giving the IRS new administrative toolsto detect, deter and discourage offshore tax abuses. The proposals include30% withholding on U.S. source payments to foreign financial institutions,foreign trusts, and foreign corporations that do not agree to disclose theirU.S. account holders and owners to the IRS; requiring taxpayers to disclosetheir foreign accounts on their U.S. tax returns; increasing the statute oflimitations to 6 years for failure to report certain offshore transactions andincome; clarifying when a foreign trust is considered to have a U.S.beneficiary;  and treating substitute dividend and dividend equivalentpayments to foreign persons as dividends for purposes of U.S.withholding.  This proposal is estimated to raise $9 billion over tenyears.

CellulosicBiofuels Loophole. The provision would modify the $1.01 per galloncellulosic biofuel producer credit to exclude fuels with significant water,sediment, or ash content, such as black liquor.  The provision wouldexclude from the definition of cellulosic biofuel any fuels that (1) are morethan four percent (according to weight) water and sediment in any combination,or (2) have an ash content of more than one percent (according toweight).  The provision would be effective for fuel sold or used afterdate of enactment.  This proposal is estimated to raise $24 billionover ten years. 

Clarification of theEconomic Substance Doctrine and Penalty for Underpayments Attributable toTransactions Lacking Economic Substance. This provision would clarify the application of the economic substance doctrinewhich has been used by courts to deny tax benefits for transactions lackingeconomic substance.  The provision would also impose a 40% strictliability penalty on underpayments attributable to a transaction lacking economicsubstance (unless the transaction was disclosed, in which case the penalty is20%). The proposal is estimated to raise $5 billion over ten years. 

Reductionin the Medicare Improvement FundThe Medicare Improvement Fund (MIF)contains funds that are available to the Secretary to make improvements to theoriginal fee-for-service program under Parts A and B of Medicare.  Undercurrent law, approximately $20 billion is available for services furnishedduring FY2014.  This provision would reduce the funding available in theMIF by $8 billion.  This proposal is estimated to save $8 billion overten years.

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