Joe Biden is under increasing pressure from American companies to avoid tax hikes in order to fund the billions of dollars in infrastructure investments promised by the US president in the coming months.
The stalemate between the White House and U.S. business poses a new political hurdle to Biden’s economic agenda, even as it approaches Congressional approval for an immediate $ 1.9 billion stimulus plan, expected to be in mid-March .
The Biden administration and corporate groups largely agree that additional large-scale government funding is required to modernize US infrastructure, fund research and development, and promote green energy.
But the most influential lobby groups representing the American corporation in Washington are warning the president not to raise their taxes to pay for the measures. They argue that including the tax hikes in a bill later this year would be economically damaging and could torpedo the legislation.
“All I can say is that from a business perspective, increasing the corporate tax rate will make American companies less competitive the moment we need a major economic recovery,” said Neil Bradley, chief policy officer for Commerce the Financial Times with. “And it will probably be impossible to hand over an invoice.”
The Business Roundtable, whose members include the largest blue-chip companies, is also against an increase in corporate taxes to finance infrastructure spending.
For permanent policies that have an ongoing cost, the president pledges to pay for them by asking the richest Americans and corporations to pay their fair share
During the 2020 campaign, Biden called for a US corporation tax increase from 21 percent to 28 percent, partially reversing the tax cuts decided by his predecessor Donald Trump in 2017 for both budgetary prudence and fiscal equity.
The White House has not provided details on its next economic proposal, which will focus on infrastructure, transport and clean energy. Internal discussions are ongoing, however, and the President has publicly met with business and union leaders as the plan is drawn up.
Analysts believe the administration’s proposals will cost between $ 2 billion and $ 4 billion, depending on the specifics. The White House has not confirmed a price tag.
The longer-term spending would be added to the temporary stimulus package that is already underway. The House of Representatives is due to come up with a bill this week that includes $ 1.9 billion in pandemic aid, including for individuals and state and local agencies.
“The president has long spoken about the importance of – as we move to our economic recovery plans – investing in America, creating millions of additional well-paying jobs, tackling the climate crisis, promoting and rebuilding racial justice better than before, “a White House spokesman told the FT.
“For permanent policies that have an ongoing cost, the president pledges to pay for them by asking the richest Americans and corporations to pay their fair share,” the spokesman added. In addition to higher corporate taxes, Biden has proposed increasing capital gains taxes for those with incomes greater than $ 1 million and wage taxes for high-income households.
The debate over the need to meet the cost of long-term government investment will be another test of changing policies on debt and deficit in Washington. Both Republicans and Democrats have been less concerned about the need for fiscal caution in recent years.
If the government pulled back from the higher taxes to get Republican support and pass the second phase of its economic agenda, it would be disappointing for many Democrats, but it could not sink the plan.
“[Biden officials] Feeling committed to a progressive tax structure is when to do so. At the moment, relief is the number one priority, “Ro Khanna, the California Democratic legislature, told the FT. “I think people are realizing that in a low interest rate environment with low inflation, getting money out of people is important. . . important.”
Business groups suggest that instead of funding new infrastructure spending by increasing the corporate tax rate, other sources of income could be explored.
This could include the increase in federal gas tax, which has stood at 18.4 cents per gallon since the early 1990s and does not include any indexation for inflation. However, this would present its own political challenges as it would hit rural states particularly hard and disproportionately hit low-income households who drive a lot, making it regressive and potentially violating Biden’s promise not to levy taxes on households. who earn less than $ 400,000 a year.
“We may think we don’t want to pay for everything for stimulus purposes, we just want to put some money into the economy. This is not an inappropriate short-term position emerging from a recession like we are now, but it would not be a way to prepare for long-term success, “said Matt Sonnesyn, vice president of infrastructure for the Business Roundtable. Energy and the Environment said during a panel last week.
“It would be a really terrible shame if Congress didn’t address the long-term funding and funding problems facing our country’s infrastructure on this package,” he said.