U.S. House and Senate Passes Middle Class Tax Relief and Job Creation Act of 2012 (H.R. 3630)
On February 17 the House voted 293 to 132 and the Senate voted 60 to 36 in passing H.R. 3630, a compromise legislation that will extend jobless benefits for approximately 160 million workers. These benefits are unfunded, and generally will increase the federal deficit by approximately $89 billion over the coming decade. Separately, according to a Congressional Budget Office estimate released February 15, the measure would add $141 billion to the deficit during fiscal 2012-2013, with $52 billion of that cost gradually recouped over the coming decade.
According to the Obama Administration, the legislation will generate $40 per week for the typical American family, or $1,000 for calendar 2012. These benefits will be generated by a 2 percentage-point cut in payroll taxes, and a renewal of jobless benefits that deliver about $300 a week to people out of work for more than six months. However, the legislation does reduce the maximum number of weeks that jobless benefits will be received by workers in states with the highest jobless rates, from 99 weeks to 73 weeks by the end of the year.
Additional legislation provisions include a reduction in reimbursements for physicians who treat Medicare patients, at a cost of $18 billion; this cost will be paid for in part by cuts to a fund created under the 2010 health care law that awards grants for preventive care, and by curbs on Medicaid payments to hospitals that care for uninsured patients.
With the current national debt at $15 trillion, there is concern that the legislation will have no meaningful impact on jobs growth, and therefore will have no impact on overall U.S. economic growth and consumer spending despite the fact that an average family’s 2012 cash flow will increase by $1,000. Further, the legislation does not address any funding provisions for Social Security.
EisnerAmper LLP continues to monitor the provisions of H.R. 3630 and will provide additional observations, in addition to comments on emerging federal tax legislation.