Biden Administration Releases Infrastructure Proposal
This week, President Biden announced the first of a two-part infrastructure proposal, the American Jobs Plan, which includes the Made in America Tax Plan.
According to the Administration’s fact sheet, the 8-year, $2.25 trillion proposal includes $621 billion in transportation and infrastructure improvements aimed to modernize 20,000 miles of roads and renovate at least 10,000 bridges.
The plan would direct $174 billion to promote adoption of electric vehicles (EV) and creates grants and incentives for private industry and state and local governments to install 500,000 EV charging stations over the next ten years.
In addition, the Biden Administration recommends extending key clean energy tax credits expected to cost $300 billion over the next decade.
To finance the plan, the Biden Administration would raise corporate taxes from 21 percent to 28 percent and increase taxes on companies’ foreign earnings.
While the Biden Administration released a framework, Congress must draft and pass the legislation where it will face an uphill battle in the divided Senate and could face challenges in the House where Democrats hold a very slim vote margin.
Congressional Republicans quickly voiced opposition to the plan and associated tax increases.
Several Democratic Representatives from the northeast stated they would not vote for a package that includes tax changes unless Congress also repeals the State and Local Tax (SALT) caps.
Recognizing the likely need to move the package without bipartisan support, Senate Majority Leader Chuck Schumer (D-NY) asked the Senate Parliamentarian to allow Democrats to move the bill under reconciliation, which would allow Senate Democrats to pass the measure on strict party lines.
Success of this route, if permitted, is dependent on support from moderate Senate Democrats like Sens. Manchin (D-WV), Sinema (D-AZ), and Kelly (D-AZ) who urged a bipartisan path forward.
In addition to policy priorities, various incentives, and proposed tax credits, the Administration proposes funding levels for key programs including–
— $300 billion for housing-related investment including $27 billion for a Clean Energy and Sustainability Accelerator, intended to “mobilize private investment into distributed energy resources; retrofits of residential, commercial and municipal buildings; and clean transportation;”
— $35 billion for clean energy technology and jobs, including $5 billion for climate-focused research and $15 billion for climate demonstration projects (including “utility-scale energy storage, carbon capture and storage, hydrogen, advanced nuclear, rare earth element separations, floating offshore wind, biofuel/bioproducts, quantum computing, and electric vehicles”).
Made in America Tax Plan
President Biden is proposing $2 trillion in corporate tax increases over 15 years to help offset the cost of the infrastructure components of the plan.
Broadly speaking, the revenue-raising side of the Made in America Tax Plan reverses many changes included in the Tax Cuts and Jobs Act (TCJA) passed in 2017, and closely tracks with President Biden’s campaign proposals.
Among other tax provisions, the plan raises the corporate tax rate to 28 percent (from 21 percent); increases a minimum tax on multinational corporations by doubling its rate to 21 percent and requiring companies to calculate that tax on a country-by-country basis; and imposes a 15 percent minimum tax on companies’ book income (which is the income corporations use to report their profits to shareholders).
The American Jobs Plan also eliminates tax breaks available for oil companies, makes it more difficult for businesses to deduct expenses associated with offshoring jobs, and boosts IRS funding for enforcement actions against corporations.
President Biden did not propose an increase in motor fuels excise taxes or a change towards a vehicle mile traveled (VMT) tax.
The legislative strategy for President Biden’s plan remains unknown, as key Democratic Congressional leaders, including House Transportation and Infrastructure Chairman Peter DeFazio (D-OR), would prefer to bundle an infrastructure package with surface transportation, which expires September 30, 2021.
More details on the process are expected to come when Congress returns to session.
Looking ahead to the American Families Plan, we expect President Biden to announce proposals affecting taxes on high-income individuals’ income, capital gains, estate taxes, step-up in basis and a potential extension of the expanded child tax credit.
White House: The American Jobs Plan Fact Sheet
TribLive Editorial: Sensible Infrastructure Investment Can Bring Nation Together
PG Editorial: The Way Forward From The Inside Out: Infrastructure