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President's jobs package has a flipside

Speaker of the House John Boehner applauds during U.S. President Barack Obama's address to a Joint Session of Congress at the U.S. Capitol on September 8, 2011 in Washington, D.C.

Kai Ryssdal: Dateline Columbus, Ohio, from the Associated Press today: "President Barack Obama is challenging Congress to pass his jobs bill immediately, asking lawmakers what on earth are we waiting for."

That's basically the state of things as Mr. Obama stumps for his $450 billion plan. It's all paid for, he says. He wants to limit some income tax deductions for companies and for families making more than $250,000 a year.

Politics and economic reality being strange bedfellows, though, we asked Marketplace's John Dimsdale to find out what might really happen.


John Dimsdale: One way the Obama plan pays for new jobs is by limiting the deductions wealthy people can claim on income from municipal bonds. That's one way local governments pay for parking lots and sewer projects.

But investment adviser Richard Shaw at QVM Group says if municipal bonds are less attractive to wealthy investors, states and cities will have a tougher time raising money.

Richard Shaw: That results in either the cities having higher cost of funding, which means certain projects won't get funded, or local property taxes and income taxes will go up to pay for it.

The result, he says, will be fewer jobs created. Capping deductions the wealthy claim on charitable contributions could also have unintended consequences.

Diana Aviv heads Independent Sector, a coalition of 600 nonprofits. She says those organizations could take advantage of the president's payroll tax incentives to hire more people, but not if they lose contributions from well-heeled supporters.

Diana Aviv: The fact that you give us tax credits or tax deductions that we can take off the payroll tax is good and well, but doesn't work if we don't have the cash with which to actually invest in these new jobs.

But Brian Deese, with the White House's National Economic Council, says those charitable and municipal bond tax deductions are windfalls for high-income people who will donate or invest anyway.

Brian Deese: The evidence shows that setting the maximum deduction at those levels will not materially reduce charitable giving or investment in tax-exempt bonds. In fact the last time the amounts the wealthiest Americans could deduct was reduced, individual charitable contributions actually rose.

Deese says when the economy is performing well, the wealthy are more likely to invest or contribute, whatever the size of the tax deduction.

In Washington, I'm John Dimsdale for Marketplace.

About the author

As head of Marketplace’s Washington, D.C. bureau, John Dimsdale provides insightful commentary on the intersection of government and money for the entire Marketplace portfolio.

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