What You Need to Know About the American Jobs Act

This contributed post is for informational purposes only. Please consult a business, financial and legal professional before making any decisions. We may earn money or products from the affiliate links in this post.

Obama unveiled his $447 Billion American Jobs Act (AJA) this past Thursday (9/8), asking congress 12 times to “Pass this Bill”. The AJA intends to address our 9.1% unemployment rate (Economists view 5.0% unemployment as healthy) and the weakness of our economic recovery from the Financial Crisis. Regardless of your economic persuasion there is a little something in this Bill for everyone: infrastructure spending, tax cuts, help for the unemployed, support for veterans and deficit reductions.

So how can the American Jobs Act help you?

1.  Business Owner? It’s about to get cheaper for you to employ people. The Payroll tax of 6.2% will be cut in half. There will also be a temporary tax holiday on all payroll taxes related to new hires or an increase in wages.
2.  Been looking for work for a while? The AJA proposes a host of new programs to reintegrate people into the workforce. There is also a proposal to extend unemployment insurance so there is no sudden loss of benefits.
3.  Currently working? About 40% of the cost of the American Jobs Act is related to lowering taxes for working families. A family making $50,000 could see an increase in take-home income of $1,500.
4.  Are you a teacher or first responder? The AJA intends to save 280,000 teaching and first responder jobs and make investments to repair and refurbish schools.

As this is YOUR money, we want to help you figure out where it is going. Here are the 4 key areas of expenditure:


  1. Tax Cuts for Small Business ($70B):  for the 98% of businesses that pay less than $5m / year in payroll taxes the President’s plan intends to reduce that burden by half.  Payroll taxes are the expenses, paid from an employer’s funds, directly related to employing a worker.  They generally include social benefit and unemployment taxes.  This part of the AJA is intended to make it cheaper for almost all businesses to employ people.
  2. Putting Americans back to Work & Infrastructure Investments ($140B):  this section of the bill includes a $105B investment to repair and rebuild 35,000 schools, ailing communities and weathered transportation infrastructure.  It also includes a further $35B to employ 280,000 teachers and first responders that would otherwise be laid off.
  3. Pathways to work for the long term unemployed ($62B):  we all know the longer you have been looking for work the more hopeless the search feels.  The President hopes that reforms to unemployment insurance and tax credits for employing the long term unemployed will push more of the long term unemployed back into gainful employment.  Somewhat less intuitively the reform also allows for an extension of unemployment insurance to prevent as many as 6 million people losing benefits.
  4. Tax reduction ($175B):  this provision intends to put about $1,500/ year back in the pockets of families with an annual income of around $50,000.  The plan will reach 160 million workers in total so there is a good chance you will benefit but it is unclear by how much.

Ironically, the most important part of this plan, and likely the most contentious, will be how it is paid for.  There are no details available yet but the President intends to release a further deficit reduction of $1.5 trillion this week. This is in addition to the reductions that have already been signed into law.  Check back with us to see what it means for you.

Let us know what you think of the bill.

To learn more about the SmartAsset Team, visit SmartAsset.com.