H.R. 3630: The Middle Class Tax Relief & Job Creation Act of 2011

H.R. 3630

The Middle Class Tax Relief & Job Creation Act of 2011

Sen. Bernard Sanders

December 13, 2011 (112th Congress, 1st Session)

Staff Contact

Floor Situation

Next week, the House is expected to consider the Middle Class Tax Relief & Job Creation Act of 2011.  The legislation was introduced on Friday, December 9, 2011. The floor situation and the CBO estimate of the bill’s budget impact will be updated and circulated next week. 

Bill Summary

The Middle Class Tax Relief & Job Creation Act of 2011 would provide a fully-offset extension of the current payroll tax rates, a delay in the implementation of the Medicare Sustainable Growth Rate (the so-called “Doc Fix”), and an extension of reformed Unemployment Insurance benefits. The legislation would provide assistance to Americans suffering in the Obama economy, while ensuring that these policies will not increase the federal deficit by freezing pay for members of Congress and federal workers, reforming Unemployment Insurance, reducing subsidies, and getting rid of waste, fraud and abuse in some Washington programs.  In addition, the bill would provide new incentives for job creation by extending 100 percent business expensing, removing burdensome EPA regulations and taking action on the bipartisan Keystone XL energy project. A summary of the bill’s major provisions follows below.



North American Energy Access:  The bill would require the President to issue a permit for the Keystone XL pipeline unless he determines that the pipeline would not serve the national interest.  The permit would be required within 60 days of enactment of this Act. If the President makes such a finding he would be required to submit a report to Congress providing justification for such a determination. Any permit issued under this section would be required to comply with all applicable Federal and state laws and would require the reconsideration of routing within the State of Nebraska.

EPA Regulatory Relief:  The bill would provide a legislative stay of four interrelated Environmental Protection Agency rules, commonly referred to as the “Boiler MACT rules,” that govern emissions of mercury and other hazardous air pollutants from approximately 200,000 boilers and incinerators nationwide.  This would require the Administrator of the EPA to promulgate, 15 months from the date of enactment, new regulations for industrial, commercial, and institutional boilers and process heaters and commercial and industrial solid waste incinerator units.  The bill would also extend the deadline for compliance with the new rules from 3 years to at least 5 years.  Finally, this provision requires that the emissions standards set by the Administrator in the new rules must be achievable in practice and stipulate that the Administrator should impose the least burdensome regulatory alternatives.

Extension of 100 Percent Expensing:  The bill would extend 100 percent expensing for qualified real property purchased by a business for an additional taxable year, through 2012. Under legislation enacted in late 2010, qualifying property purchased (and generally placed into service) after September 8, 2010, and before January 1, 2012, is eligible for “expensing” (sometimes referred to as “100-percent bonus depreciation”), which allows a business to deduct the cost of the property immediately that year.  Prior to the implementation of 100 percent expensing, business taxpayers were generally required to depreciate the cost of capital assets over several years, with the exact period depending on the asset.  In addition, the bill would expand a provision which allows taxpayers to elect to claim AMT credits in lieu of bonus depreciation.  Extending 100 percent expensing will encourage businesses to invest in additional real property.



Extending the Payroll Tax Reduction: The legislation would extend the payroll tax rate reduction, which lowers the standard Social Security payroll tax rate by two percentage points for employees and the self-employed, for one calendar year, expiring on December 31, 2012.  The bill would extend the current rate of 4.2 percent for employees, and 10.4 percent for the self-employed.  The bill would make no changes to the payroll tax rate for employers (6.2 percent) or to the amount of annual wages and net self-employment income subject to the Social Security payroll tax ($106,800 in 2011).  Prior to 2011, employees and employers each paid 6.2 percent of covered earnings (for a total of 12.4 percent) up to an annual income limit.  The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reduced the FICA tax rate for employees by two percentage points for calendar year 2011.  To protect the Social Security trust funds from a loss of payroll tax revenues resulting from the payroll tax reduction, the law requires appropriated amounts to “be transferred from the general fund at such times and in such manner as to replicate to the extent possible the transfers which would have occurred to such Trust Fund had such amendments not been enacted.” This legislation would extend the current reduction for 2012.

Extending Unemployment Insurance Benefits:  The bill would extend and reform federally funded benefits under the Emergency Unemployment Compensation (EUC) and the Extended Benefit (EB) programs for 13 months, though the end of January 2013. These extended benefits are set to expire on expire the week ending on or before January 3, 2012. Under the expiring emergency benefits, when eligible workers lose their jobs, the joint federal-state Unemployment Insurance (UI) program may provide up to 26 weeks of income support through the payment of regular UI benefits. In addition, UI benefits may be extended in two ways: (1) for up to 53 weeks by the temporarily authorized Emergency Unemployment Compensation (EUC) program; and (2) for up to 13 or 20 weeks by the Extended Benefit (EB) program if certain economic situations exist within the state.  Thus, UI is available for up to 99 weeks in certain states with high unemployment.  The bill would use a two-step process to gradually reduce the current maximum amount of time total benefits could be distributed in states with high unemployment from 99 weeks to 59 weeks by mid-2012.  For individuals who are collecting EUC benefits in December 2011, the bill would allow them to complete the tier of benefits they are currently in, with some able to collect up to another 13 weeks of payments in 2012 if they are in a high unemployment state.

In addition, the bill would reform the UI benefit program to require that participants are actively working and training towards employment and to streamline the program.  Some of these requirements are listed below.

  • The bill would establish basic job search requirements for everyone collecting state UI benefits to ensure that all are actively seeking work and have registered for employment services, and posted resumes.
  • The bill would require UI recipients who lack a high school diploma to be making progress toward a GED; allows the state to waive this requirement if it would be unduly burdensome in individual cases.
  • The bill would allow states to apply for cost-neutral “waivers” of Federal law, so they can test innovative strategies to promote faster reemployment of unemployed workers. 
  • The bill would clarify that states may drug test recipients they have determined are likely to be using illegal substances.
  • The bill would require states to reduce current state UI benefits to recover prior UI overpayments, including overpayments owed to other states or the Federal government. 
  • The bill would establish requirements for states to provide reemployment services and reemployment and eligibility assessments to EUC recipients.
  • The bill would require states to offset Federal EUC benefits to recover UI overpayments owed to other states or the Federal government, and would convert a current 50 percent ceiling on such offsets into a 50 percent floor.
  • The bill would repeal a 2009 stimulus law provision that blocked states wanting to improve solvency from reducing state unemployment benefits while still receiving Federal EUC funds. 

Medicare Physician Payment Rates: This provision would prevent a 27.4 percent cut in Medicare physician payment rates slated to begin on January 1, 2012 and instead increase payment rates by 1 percent in 2012 and again in 2013.  The two years of stable Medicare payment rates would be the most certainty physicians have had since 2004. During this period, the Medicare Payment Advisory Commission (MedPAC), Government Accountability Office (GAO), and Department of Health and Human Services (HHS) are required to submit reports to Congress to assist in the development of a long-term replacement to the current Medicare physician payment system.

Ambulance Add-On Payments:  This provision would extend through December 31, 2012, the following add-on payments:  2 percent for urban ground ambulance services, 3 percent for rural ground ambulance services, and an increase to the base rate for ambulance trips originating in qualified “super rural” areas as calculated by the Secretary (currently 22.6 percent). 

Outpatient Therapy Caps: This provision would extend the therapy caps exceptions process through December 31, 2013 with modifications that will require that the physician reviewing the therapy plan of care be detailed on the claim, reject all claims above the spending cap that do not include the proper billing modifier, and provide for a manual review of all claims for high cost beneficiaries to ensure that only medically necessary services are being provided.  Furthermore, the spending caps ($1,880 in 2012), which have been in effect since 2006, would be extended to the hospital outpatient department setting to prevent a shift in the site of service to higher cost settings once enforcement of the current exceptions process begins.  Exempting these services in the HOPD setting made sense when the hard therapy cap was in place, but it no longer makes sense with the exceptions process. 

Physician Work Geographic Adjustment: This provision would extend, through December 31, 2012, the current floor used in calculating the portion of Medicare physician payments that accounts for the geographic area where a physician practices.  This provision would increase physician payment rates in roughly 54 of the Medicare program’s 89 geographic areas.

Qualified Individual (QI) Program: This provision would extend the QI program, which provides federal reimbursement for states to cover Part B premiums for seniors with incomes between 120 and 135 percent of poverty, through December 31, 2012.  The provision would reduce the capped allotment states receive to administer the program from $1 billion in 2011 to $730 million in 2012, which is anticipated to still fully fund the program.

Extension of Transitional Medical Assistance (TMA):  This provision would provide for a one-year extension of TMA, through December 31, 2012, for low-income families transitioning into employment. In addition, this provision ensures that only those individuals with incomes below 185 percent of the federal poverty level (FPL) can qualify for TMA benefits.

Relaxing Arbitrary Restrictions on Physician-Owned Hospitals:  This provision would allow those physician-owned hospitals that were under construction but did not have Medicare provider numbers as of December 31, 2010, to open and operate under the whole hospital exception to the Stark antitrust laws.  This will allow these hospitals to bill Medicare for services provided to Medicare beneficiaries in these facilities that were under construction prior to the ban on new physician-owned hospitals.  This provision would also relax strenuous new requirements intended to prevent most existing physician-owned hospitals from renovating or expanding.

ObamaCare Exchange Subsidy Recapture: The Democrats’ health care law fails to adequately protect taxpayers from overpayments of the federal subsidies to purchase health insurance, even in the case of fraud, by limiting the amount of subsidies that can be recaptured if an individual/family receives a greater subsidy than he/she/they are entitled to.  This provision would increase the maximum amount of subsidy overpayments that must be repaid.  Similar policies were overwhelming adopted in last year’s “doc fix” and the repeal of the onerous 1099 reporting requirement earlier this year.

Reduction in the Prevention & Public Health Fund: The Prevention and Public Health Fund, Section 4002 of the PPACA, is a $17.75 billion account (FY12-FY21) that provides the Secretary of HHS unlimited authority to spend above and beyond appropriated levels for any activity authorized by the Public Health Service Act.  This provision would reduce the funding for the Prevention and Public Health Fund.

Parity in Payments for Hospital Outpatient Department (HOPD) Evaluation and Management (E/M) Office Visit Services: Under current law, Medicare pays more for E/M office visit services furnished in the HOPD setting than it does for the exact same services performed in the physician office setting.  While the amount Medicare pays physicians for these services in an HOPD would remain unchanged, the hospital facility fee payment would be reduced, equalizing total Medicare payments for identical services, regardless of where it is furnished beginning in 2012. 

Reducing Bad Debt Payments:  High reimbursements to hospitals, skilled nursing facilities, federally qualified health centers (FQHCs) and dialysis centers are believed to discourage providers from doing enough to collect unpaid cost-sharing that they are required, by CMS, to take reasonable steps to collect (“bad debt”).  This provision would phase down the bad debt reimbursements to 55 percent over a three-year period beginning in 2013. 

Medicaid Disproportionate Share Hospital (DSH) Allotments: This provision would rebase the DSH allotments for FY2021 and determine future allotments from the rebased level using current law methodology. 

TANF Extension:  The bill would extend the authorization of the Temporary Assistance for Needy Families (TANF) state block grant program at current level of $16.5 billion annually, through September 30, 2012.  In addition, the bill would improve program administration by standardizing data elements to improve integrity and collaboration.  The legislation would also prohibit welfare funds from being accessed in strip clubs, liquor stores, and casinos by blocking welfare EBT cards from working in ATMs there.



Flood Insurance Reform:  The provision would reauthorize, reform and strengthen the National Flood Insurance Program (NFIP) to ensure that it is actuarially sound and able to respond to future emergencies without incurring more debt or lapsing as it has three times since 2010.  As of January 31, 2011, the NFIP’s outstanding debt and accrued interest cost stood at $17.7 billion. Under current law, these funds borrowed from the U.S. Treasury must be repaid with interest. The program, however, is not in a position to repay the debt.  This legislation would reauthorize the program through FY 2016 and make a number of changes to the NFIP aimed at improving the financial status of the program, including increased premiums for certain higher-risk properties and removing premium subsidies for certain properties. 

The legislation would reauthorize the NFIP through September 30, 2016, and amends the National Flood Insurance Act. Some key provisions of extension include: (1) a five-year reauthorization of the NFIP; (2) a one-year delay in the mandatory purchase requirement for certain properties; (3) a phase-in of full-risk, actuarial rates for areas newly designated as Special Flood Hazard; (4) establishment of the Technical Mapping Advisory Council; and (5) an emphasis on greater private sector participation in providing flood insurance coverage.  The bill would establish minimum deductibles set at $1,000 for properties with full-risk rates and at $2,000 for properties with discounted rates.  The bill would also index maximum coverage limits for inflation beginning in 2012. 



Spectrum Auction Authority and Public Safety Communications:  This provision would advance wireless broadband service, spur billions of dollars in private investment, and create thousands of jobs by auctioning spectrum frequencies used to provide broadband services.  This would provide additional broadband spectrum and authorize the Federal Communications Commission to conduct incentive auctions. Incentive auctions give the FCC the flexibility to promote more efficient use of spectrum by sharing a portion of auction proceeds with current licensees that are willing to return their licenses to the Commission for re-auction. 

Specifically, the bill would establish Establishes clearing and auction timelines for spectrum in 1915-1920 MHz and 1995-2000 MHz (the PCS H Block), 2155-2180 MHz (the AWS-3 block), 1755-1780 MHz, 15 MHz from the government spectrum at 1675-1710 MHz paired with 15 MHz to be determined by the FCC.  The bill would also allow the president to substitute alternate spectrum for 1755-1780 MHz and would reallocate Reallocates the 700 MHz D Block from commercial to public safety use.  The bill would also grant the FCC authority to conduct incentive auctions under which it shares some of the proceeds with licensees who return spectrum.  The bill would also assign certain spectrum for public safety broadband use to the Administrator.



GSE Guarantee Fees:  The bill would increase guarantee fees charged by the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac to lenders for assuming the credit risk on the loans GSEs purchase in the secondary mortgage market.  These fees are in effect a premium to guarantee the repayment of principal and interest on those securities, insuring Mortgage Backed Securities (MBS) investors from the risk that the securities will default.  Currently, GSEs charge much less to guarantee the performance of their MBS than competitors in the private market, which has the effect of transferring greater risk to the nation’s taxpayers and crowding out the private market.  Imposing higher guarantee fees would ultimately lower the deficit, increase competition in the secondary mortgage market, and reduce taxpayer exposure to the GSEs.  These fees should be set as if the GSEs were held to the same capital standards as private banks or financial institutions but shall increase by at least 10 basis points over 2011 levels.  The increase is to be phased-in over the next two years.  Similar fee increases have already been called for by the Obama Administration.  The provisions of this section expire on October 1, 2021. 

Information for Administration of Social Security Provisions Related to Non-covered Employment: The bill would prevent Social Security overpayments by improving coordination with states and local governments.  Under law, Social Security payments are generally reduced if a beneficiary receives a pension from work not covered by Social Security. One of the major causes of Social Security overpayments occurs when required benefit reductions under the windfall elimination provision (WEP) and the Government Pension Offset (GPO) are not accounted for and full benefit payments are incorrectly distributed.  According to the Social Security Administration (SSA), Social Security overpayments often result when beneficiaries fail to report receipt of a pension from non-covered employment. The President’s FY 2012 Budget included a legislative proposal that would require state and local governments to identify and report pensions they pay to retired employees based on work not covered by Social Security. If the SSA had this data from state and local governments, it could determine whether to reduce benefits because of the WEP or GPO statutes.  

Refundable Child Tax Credit Fraud:  The bill would save taxpayers billions and reduce the deficit by eliminating waste, fraud, and abuse and ensuring that federal benefits reach their intended recipient.  Unlike many other tax benefits, the law does not require the taxpayer or eligible child to have a social security number in order to receive the Child Tax Credit (CTC) and its refundable component, the Additional Child Tax Credit (ACTC), which provides a refundable tax credit of up to $1,000 per child.  According to a June 2011 report from the Department of Treasury, individuals who are not authorized to work in the United states were paid $4.2 billion in refundable credits in 2010. This provision would close this loophole by requiring taxpayers to provide a social security number to receive this tax credit. 

Ending Unemployment and Supplemental Nutrition Assistance Program Benefits for Millionaires:  The bill would means-test unemployment compensation for which certain high-income individuals would otherwise be eligible.  For taxpayers with adjusted gross income (AGI) of at least $750,000 ($1,500,000 in the case of a joint return), a portion of any unemployment compensation received—the recipient’s “excess unemployment compensation,” as determined under a specified formula—would be subject to a non-deductible 100-percent excise tax.  The provision would be effective for unemployment compensation received after 2011.  In addition, the bill would declare that any household with a member that receives income or assets with a fair market value of $1 million shall immediately be ineligible to receive SNAP benefits until such time as the household meets the income and asset requirements.


Federal Employee Retirement Contribution Reform:  This provision would reform federal workforce retirement programs to bring them more in line with the standard practices used in the private sector.   Under current law, employees covered by the Federal Employees’ Retirement System (FERS) contribute 0.8 percent of their pay to the Civil Service Retirement and Disability Fund, while the federal government contributes an amount equal to 11.9 percent of their pay.  For workers hired before 1984 and participating in the Civil Service Retirement System (CSRS), their contribution is 7 percent of pay while the government pays the equivalent of 19 percent of their pay. The bill would increase the contributions required by current federal employees enrolled in FERS from 0.8 percent to 2.3 percent for three years, beginning in 2013.  The bill would increase the contribution for employees enrolled in CSRS from 7 percent to 8.5 percent for three years, beginning in 2013.  

In addition, the bill would permanently increase the FERS contribution for federal employees hired after December 31, 2012, to 4 percent, an increase of 3.2 percent. The employee contribution for special occupational groups and Members of Congress would also increased by a total of 3.2 percent, from 1.3 percent to 4.5 percent.  This bill would also change the FERS pension formula salary base for all retirees to highest-five years’ average salary. Existing CSRS and FERS employees remain subject to a highest-three years’ average salary base. Finally, this section changes the FERS pension formula multiplier for basic retirees to 0.7 percentage points, instead of 1 percent (or 1.1 percent with 20 or more years of service).  

Annuity Supplement:  The bill would eliminate the FERS minimum supplement for individuals not subject to mandatory retirement, beginning January 1, 2013.  Individuals subject to mandatory retirement include certain categories of employees such as law enforcement, fire fighters, air traffic controllers, and nuclear materials couriers. Under current law, the FERS minimum supplement is paid to these employees and to federal employees who retire before the age of 62. The FERS minimum supplement represents the amount the employee would have received from Social Security if he were 62 years old on the day he retired, and is paid until the retiree reaches age 62 and begins receiving his actual Social Security payments.

Civilian Federal Employee Pay Freeze:  The bill would extend a current freeze pay at current levels for non-defense, civilian federal employees for one year, through 2013. Congress and the president have already enacted legislation to freeze civilian pay until the end of 2012 (P.L. 111–322).  As President Obama said, “Getting this deficit under control is going to require some broad sacrifices and that sacrifice must be shared by the employees of the federal government.” In keeping with this principle and similar recommendations from the National Commission on Fiscal Responsibility, this legislation would extend the pay freeze for non-defense federal workers at a time when families and small businesses around the nation are also being forced to tighten their belts in the Obama Economy. The bill would also reduce the non-security discretionary spending limits enacted as part of the Budget Control Act to reflect the savings achieved as a result of the one year pay freeze. 

Increasing Medicare Premiums for High Income Beneficiaries:  This provision would adopt President Obama’s recommendation to increase Medicare Part B and D premiums for high-income beneficiaries beginning in 2017.  Specifically, this provision would:  extend the current freeze of the income brackets beyond 2019 until 25 percent of beneficiaries are paying income-related premiums; increase the premiums that high-income beneficiaries pay by 15 percent; and apply a high-income threshold of $80,000 for singles and $160,000 for couples, respectively. Under Medicare Parts B and D, certain beneficiaries already pay higher premiums as a result of their higher levels of income. This will help improve the financial stability of the Medicare program by reducing the Federal subsidy of Medicare costs for those beneficiaries who can most afford them.  



Repeal of Certain Timing Shifts of Corporate Estimated Tax Payments:  The bill would repeal a series of recently enacted tax payment schedule timing shifts that have been implemented to modify the required payment of taxes for budgetary estimate purposes.  Under current law, companies are generally required to pay corporate estimated taxes according to a regular schedule set by statute.  For companies with assets of $1 billion or more, that general payment schedule has occasionally been modified to shift the timing for payment of certain such installments. Typically, these provisions have increased covered corporations’ estimated tax payments that are due in the fourth quarter of particular years by a certain percentage, while decreasing those corporations’ payments by a corresponding amount in the first quarter of the following years.  Under the bill, a series of these recently enacted timing shifts would be repealed, restoring the regular payment schedule that applied prior to their enactment.