Tax Credit Crackdown Pays for Jobs Bill

President Barack Obama signed into law the Education Jobs and Medicaid Assistance Act (HR 1586), whose cost will be offset mainly by the closing of foreign tax credit loopholes and reduction in food stamp benefits.

The House returned from its summer break Tuesday for an emergency session to pass the $26 billion jobs bill that the Senate passed on Aug. 5. The bill was approved mainly on party lines with a vote of 247-161, the Associated Press reported. Obama signed the bill into law later that evening.

According to Speaker Nancy Pelosi’s website, the bill would create and save 319,000 jobs. The bill includes $10 billion in funding to save 161,000 teacher jobs and $16.1 billion in health assistance to states that will help keep many other jobs, including those of police officers and firefighters.

New York state will get approximately $1.4 billion of that money over two years, with New York City expecting to receive $600 million, Crain’s New York Business reported.

The cost of the bill will mainly be offset by crackdowns on companies abusing foreign tax credits. According to Pelosi’s site, the bill includes provisions to stop corporations from splitting foreign tax credits from the income subject to foreign tax, which allows them to reduce their U.S. taxes even though the foreign income remains overseas. The provisions would also eliminate tax incentives to move jobs offshore and move assets overseas to avoid taxation. This measure is expected to bring in $9.8 billion.

The other big offset comes from the reduction in food stamp benefits, which is expected to bring in $11.9 billion, Pelosi’s website said. Starting March 31, 2014, food stamp benefits will return to the levels individuals received pre stimulus levels.

Republicans and advocates for the poor joined together in protesting the raising of taxes on U.S.-based multinational companies and the phasing out of the increase in food stamp payments implemented in last year’s recovery bill, the AP reported. Other offsets include $2.8 billion from rescissions from programs no longer needing funding, $2 billion from the calculation of the Medicaid average manufacturing price for certain drugs and $1 billion from the elimination of earned income tax credits (EITC), Pelosi’s website said.

The Congressional Budget Office (CBO) said the bill would reduce the deficit by $1.4 billion over 10 years.