Corporate Tax

Biden plans $ 2.25 trillion in spending and corporate tax hikes (3)

President Joe Biden will unveil a $ 2.25 trillion U.S. infrastructure plan on Wednesday, paid for through corporate tax hikes. His administration said it would prove to be the most comprehensive since investing in the 1960s space program.

The four-part eight-year plan provides $ 620 billion for transportation, including a doubling of federal funding for local public transportation. It would allocate $ 650 billion to initiatives to improve the quality of life at home, such as clean water and high-speed broadband. There’s $ 580 billion to strengthen American manufacturing – about $ 180 billion of that goes into the largest non-defense research and development program currently billed – and $ 400 billion to improve the care of the elderly and people with disabilities.

Biden’s plan would increase corporate tax from 21% to 28% and set a minimum tax of 21% on global corporate profits. The White House said tax increases would “pay off in full” investment in this plan over the next 15 years.

However, the proposal faces a difficult path in Congress. It will be difficult, if not impossible, to get Republican support in either the House of Representatives or the Senate, both of which are tightly controlled by the Democrats. It will also be a challenge to bring together moderate and progressive Democrats.

WATCH: President Joe Biden will begin developing his long-term economic plan this week, with a focus on the infrastructure portion of a package that is expected to be in excess of $ 3 trillion.

(Source: Bloomberg)

“Like great projects of the past, the president’s plan will unify and mobilize the country to meet the great challenges of our time: the climate crisis and the ambitions of an autocratic China,” the White House said in a statement before Biden’s afternoon speech in Pittsburgh.

What Biden presented on Wednesday is only the first part of his long-term economic program. A second round of initiatives will be announced in mid-April. These will focus on “helping families with challenges such as healthcare costs, childcare and education”.

Read More: What’s in Biden’s $ 2.25 Trillion Infrastructure and Tax Proposal?

The program will prove to be far more complex than the $ 1.9 trillion Pandemic Relief Act signed in early March. Republicans are strongly against tax increases, and the breadth of the measures will lead to partisan and even internal democratic struggles. Republican Senate Chairman Mitch McConnell said Wednesday, “It’s like a Trojan horse called infrastructure. But in the Trojan Horse there will be more borrowed money and massive tax increases for all productive parts of our economy. “

Brian Deese, director of the National Economic Council, said the program would help the private sector even with higher corporate levies.

Tax proposals

“These public investments are among the most profitable when it comes to stimulating private investments,” Deese said in an interview with Bloomberg TV on Tuesday. “Let’s have a competitive tax system that encourages domestic investment,” he also said, arguing that the proposals will stop an “international race to the bottom” on corporate taxes.

House spokeswoman Nancy Pelosi told her caucus members on Monday that she intends to postpone the infrastructure bill through her chamber until July 4th, although according to a person familiar with the matter, she said it would be later this month could be postponed. This schedule could allow the Senate to pass the final text before the month-long August recess of Congress.

As the Covid-19 bill shows, Biden’s initial plans are much bigger than economists expected. The switch to a significant expansion of financial policy has already boosted growth forecasts for this year and raised government bond yields. While stocks have reacted with some volatility in recent weeks, the S&P 500 index hit a record high on Friday.

Biden’s plan will create millions upon millions of jobs, a administration official told reporters while refusing to give a specific number. In the outlines of the package, new union jobs have been highlighted and union formation has been made easier.

Pittsburgh model

Biden will unveil his American Jobs Plan on Wednesday in Pittsburgh, a city that sees the White House as a prime example of an old manufacturing hub being revitalized by new industries from healthcare to technology.

The government wants the same kind of reorientation that Pittsburgh has seen to bring new opportunities to working class cities across the country. The plan calls for an expensive political chess game to be played out over the next decade to try to create well-paying jobs by both updating the country’s infrastructure and preparing for the coming weather conditions brought about by climate change .

Buildings are illuminated in Pittsburgh, Pennsylvania, the United States, on Tuesday April 21, 2020.

Photographer: Michael Swensen / Bloomberg

A major undercurrent in the infrastructure plan is eliminating inequality and expanding aid to parts of society that administrative judges have left out in the past. In addition to repairing the “ten most economically important bridges in the country to be rebuilt,” $ 20 billion is available for a new program that will bring neighborhoods cut off by previous investments such as I-81 back together will be connected to freeway in Syracuse, New York. All lead pipes are being replaced to resolve water quality issues.

Another important topic is strengthening the US’s competitiveness vis-à-vis China. US $ 50 billion is earmarked for semiconductor manufacturing at home and an additional US $ 40 billion to improve research capacity in laboratories across the country.

Read more: Biden’s infrastructure plan targets electric cars and clean electricity

Climate change is also an important goal. The proposed transportation finance specifically provides $ 174 billion for electric vehicles, including sales discounts and tax incentives for consumers to buy American-made cars.

While infrastructure has traditionally been a bipartisan endeavor, Republicans have warned that they are not advocating the large renewable energy bias in the government’s approach. McConnell also said his party would not vote for tax increases.

Contact to the GOP

Administration officials said Biden is open to input from members of both parties’ Congress on what provisions should be in a final package and how to pay for them. The White House expects solid liaison with GOP lawmakers and is committed to serious discussion with them, a White House official said on condition of anonymity to discuss the government’s plans. These efforts began by inviting Republicans from relevant committees to a Tuesday briefing with Deese

But Biden’s plans don’t necessarily need Republican support to become law. Senate majority leaders Chuck Schumer and Pelosi could choose to include many of the president’s proposals in one or more budget-voting bills that only require a simple Senate majority. The challenge, as Pelosi has already indicated, is that not all elements could fit into such a bill, which sets certain requirements for inclusion.

The infrastructure package doesn’t include any of the proposed individual tax increases that Biden talked about in the campaign – like increasing the top tax rate for individuals and increasing the tax on capital gains. This is expedient, said a government official, as White House staff believe that corporate tax reform should fund infrastructure and efforts to increase the attractiveness of the US as a business location.

Long timeframe

Tax experts and lawmakers expect the government to try to raise taxes on the rich and their wealth in the second package, due out this spring.

Given the uncertain outlook for the legislation and the time it will take to implement the infrastructure package, economists have been largely reluctant to predict the potential growth impact of Biden’s plan.

“These are projects that take place over a very long period of time,” said Michael Pugliese, an economist at Wells Fargo & Co. “It takes years, and possibly decades, to get some of these things done, built, finished and completed.” The economic impact there will be very different than if you take a very large amount of money and pass it on to individuals through direct controls and unemployment benefits. “

(Updates with McConnell comment in the seventh paragraph and the economist’s comment in the last paragraph.)

– With the support of Erik Wasson, Jonathan Ferro, Lisa Abramowicz, Laura Litvan and Reade Pickert.

How to contact the reporters on this story:
Nancy Cook in Washington at ncook40@bloomberg.net;
Jennifer Epstein in Washington at jepstein32@bloomberg.net

To contact the editors responsible for this story:
Alex Wayne at awayne3@bloomberg.net

Christopher Anstey, Joshua Gallu

© 2021 Bloomberg LP All rights reserved. Used with permission.

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