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.