What the President giveth, the President taketh away. Blessed be the name of the President.
Now that President Obama has let both the expenditure and revenue-raising shoes drop, it is clear that the costs to state and local governments of the new jobs bill could very well equal—perhaps exceed—the benefits they might receive.
In his speech before Congress last week, he proposed approximately $200 billion in new inter-governmental aid to state and local governments so they could hire teachers, build roads, and so forth. That is roughly the same size as the 2009 stimulus package, which spread approximately $400 billion over two years.
Unlike his 2009 stimulus package, the president this time added a tax plan to cover the costs. It includes placing a limit on one of the biggest tax loopholes: the ability to deduct from one’s income the interest received from investments in state and local bonds. The president wants to limit the deduction to the 28 percent tax rate, instead of the approximately 40 percent marginal rate that well-heeled investors (the folks who generally buy these things) would otherwise pay.