The Job Creation and Wage Enhancement Act

Highlights:

The Job Creation and Wage Enhancement Act includes a variety of tax-law 
changes and federal bureaucratic reforms designed to enhance private 
property rights and economic liberty and make government more 
accountable for the burdens it imposes on American workers.  
Specifically, the bill: 

provides a 50 percent capital gains rate cut and prospectively
indexes capital gains to account for inflation;
increases the value of investment depreciation to equal the full value 
of original investment;
allows small businesses to deduct the first $25,000 worth of investment 
each year;
clarifies the home office deduction;
empowers taxpayers to designate a portion of their tax liability to a 
public debt reduction fund;
requires federal agencies to assess the risk and cost of each imposed 
regulation;
forces federal agencies to publicly announce the cost of their policies;
requires Congress to report the cost of mandates it imposes on state and 
local governments;
reduces the paperwork burden imposed on American business five percent;
limits the government's ability to impose undue burdens on private 
property owners; and
requires federal agencies to complete regulatory impact analyses.

Government-imposed mandates and regulations suppress wages and excessive 
taxation of capital and investment stifles economic growth and job 
creation. Current federal policies  threaten the competitiveness of 
American business, stifle entrepreneurial activity and suppress economic 
growth and job creation.  Regulations can also have a direct impact on 
the lives of all Americans -- raising the prices they pay for goods and 
services, restricting the use of their private property, and limiting 
the availability of credit.  The bill lowers taxes on investment and 
reigns in regulation to create additional jobs, enhance wages and  
recognize private property rights.

The Job Creation and Wage Enhancement Act, its sponsors assert, is 
consistent with the maintenance of a competitive marketplace.  It is 
committed to breaking down unnecessary barriers to entry created by 
regulations, statutes and judicial decisions, and calls for open, 
simultaneous and immediate competition within all industries in the 
United States.

 
Provisions:

Capital Gains Reform

The Job Creation Act allows individuals to exclude from taxes 50 percent 
of capital gains income, effectively halving the rate.  Under The bill, 
individuals in the 15 percent income tax bracket would pay an effective 
capital gains tax rate of 7.5 percent, those in the 28 percent bracket 
would effectively pay 14 percent, and those in the top bracket of 39.6 
percent would pay 19.8 percent on capital gains. Corporations would pay 
a 17.5 percent capital gains rate.  In addition, individuals may deduct 
any capital loss with respect to the sale or exchange of a principle 
residence.  The bill indexes the basis of capital assets for inflation  
(prospectively) so taxes are not paid on illusory earnings.

Neutral Cost Recovery

The bill increases the value of investment depreciation to equal the 
full value of the original investment. The current value of investment 
depreciation is less than the original investment because the amounts 
deducted in later years are eroded by inflation.  The bill adjusts the 
amounts written off after the first year by a discount rate.  The 
neutral cost recovery provision makes taxpayers pay interest on the 
delayed portions of the write-off.  The bill is expected to (1) add 
approximately a percentage point to the economic growth rate, (2) 
increase the GDP by $4 trillion between 1995 and 2000, and (3) create 
almost 2.7 million jobs.

Small Business Appreciation

The bill recognizes the important contribution small businesses make in 
our economy by encouraging investment and alleviating the cumbersome 
paperwork of depreciation schedules.  Its provisions include:

raising the expensing level from $17,5000 to $25,000, allowing small 
businesses to deduct the first $25,000 they invest in equipment and 
inventory each year;
clarifying the home office deduction allowing taxpayers to qualify if 
the home- office is (1) used exclusively for business purposes, (2) used 
on a regular basis, (3) used to perform tasks that could not easily be 
performed elsewhere, and (4) is essential to the taxpayer's business; 
and 
increasing the estate tax exemption from $600,000 to $750,000, thus 
restoring the value eroded by inflation and making it easier for small 
business owners and family farmers to keep their shops and farms in the 
family.

Taxpayer Debt Buydown

The bill allows taxpayers to designate up to ten percent of their tax 
liability to be used to help reduce the public debt.  The designated 
funds would be transferred to the Public Debt Reduction trust fund to be 
established by the Department of Treasury.  Congress is required to 
reduce spending equivalent to the amount designated by the taxpayer.  If 
for some reason the spending cuts do not occur, an across-the-board 
sequester will be imposed on all government accounts except the Federal 
Deposit Insurance Corporation, the National Credit Union Administration 
and the Resolution Trust Corporation.

Risk Assessment/Cost Benefit Analysis

The Job Creation and Wage Enhancement Act requires each federal agency 
to assess the risks to human health and safety and the environment for 
each new regulation.  Agencies must also provide the cost associated 
with the regulation and an analysis comparing the economic and 
compliance costs of the regulation to the public.  Each agency must form 
an independent peer review panel to certify the assessment and 
incorporate the best available scientific data.  The review panel 
members must either possess professional experience conducting risk 
assessment or in the given field of study.

Regulatory Budget

The bill requires federal agencies to issue an annual report projecting 
the cost to the private sector of compliance with all federal 
regulations.  The cost of the regulations will then be capped below its 
current level forcing agencies to (1) find more cost-effective  ways to 
reach goals and (2) identify regulatory policies whose benefits exceed 
their costs to the private sector. 

Unfunded Mandate Reform

Congressional Budget Office (CBO) is required to issue an analysis of 
each piece of legislation containing a federal mandate (a programs that 
burdens state and local governments with undo costs resulting in over $5 
million annually).  The analysis must include a description of the 
mandate, the expected cost to state and local governments, and if the 
mandates are to be partly or entirely unfunded.  CBO budgetary impact 
reports are to be printed in the committee reports accompanying 
legislation.  The bill caps the mandates cost below its level for the 
proceeding year.

Strengthen Paperwork Reduction Act and the Regulatory Flexibility Act

Compliance with federal regulations consumes tens of thousands of man-
hours annually.  Employers must hire lawyers and other experts to fill 
out the government paperwork.  Consequently, they hire fewer workers to 
produce goods and services.  To address this problem, The bill requires 
the government to reduce the paperwork burden by five percent annually.  
Also, The bill subjects the Regulatory Flexibility Act to judicial 
review, so small businesses can sue to enforce the law.  The Regulatory 
Flexibility Act determines whether or not a regulation has a substantial 
impact on a significant number of small businesses.  

Protection against Federal Regulatory Abuse

The bill provides individuals a "Citizens' Bill of Rights" when being 
inspected or investigated by a federal agency.  The bill of rights 
affirms individuals rights to (1) remain silent, (2) refuse a 
warrantless search, (3) be warned that statements can be used against 
them, (4) have an attorney or accountant present, (5) be present at an 
inspection or investigation, and (6) be reimbursed for unreasonable 
damages.  Also, The bill allows individuals who are threatened by a 
prohibited regulatory practice to take legal action against the 
responsible agency.  A prohibited regulatory practice is defined as an 
inconsistent application of any law, rule or regulation causing 
mismanagement of agency resources by any agency or employee of the 
agency.

Private Property

The bill allows private property owners to receive compensation (up to 
10 percent of fair market value) from the federal government for any 
reduction in the value of their property.  If a question arises over the 
value of the property, the private property owner may use an arbitrator 
to decide the outcome.

Regulatory Impact Analysis

The bill requires federal agencies to complete a regulatory impact 
analysis when drafting a major rule (affecting more than 100 people and 
costing more than $1 million).  The bill lists 23 specific criteria the 
agencies must follow, including; (1) explaining the necessity and 
appropriateness of the rule, (2) a statement of whether the rule is in 
accord with or in conflict with any legal precedent, (3) a demonstration 
that the rule is cost-effective, (4) an estimate of the number of 
persons affected by the rule, and (5) an estimate of the costs to the 
agency for implementation of the rule.