He said, for example, he was willing to agree to a lower corporate tax rate than his proposal of 28 percent if Republicans had other ideas that would work. Such a change could be politically necessary. Sen. Joe Manchin (D-W.Va.) said earlier this week that he supported raising the corporate rate from 21 percent to 25 percent, but not all the way to 28 percent.
But, Biden said: “Here’s what we won’t be open to: We will not be open to doing nothing. Inaction is simply not an option.”
The president signed a $1.9 trillion stimulus bill into law in March without any Republican support. His comments on Wednesday suggest he might not try the same approach with his proposed infrastructure package, though he has also not ruled out that possibility. Some Republicans, like Senate Minority Leader Mitch McConnell (R-Ky.), have said they support a more scaled-back infrastructure plan, but they have attacked both the proposed tax hikes and the large scale of Biden’s pitch.
Biden on Wednesday was unapologetic about the scope of his proposal, saying the money needed to finance projects beyond just roads and bridges. He said, for example, that new spending was needed to do things like improve waste treatment plants and remove asbestos from schools.
“Damnit, maybe it’s because I come from a middle-class neighborhood, but I’m sick and tired of ordinary people being fleeced,” he said.
Biden has so far not backed down on his insistence that the proposed spending increases be offset by a range of corporate tax hikes. This has prompted bipartisan unease. The Department of Treasury on Wednesday outlined the proposed tax increases on businesses that Biden is seeking in his initial plan. It would raise about $2.5 trillion over 15 years, meant to offset the costs of the infrastructure package. These changes would have to be approved by Congress. They would also amount to one of the largest tax increases in decades.
“I’m open to ideas about how to pay for this plan,” Biden said. Biden added he would not raise taxes on households earning less than $400,000 per year, a pledge he’d made during the presidential campaign.
In a 19-page report, Treasury officials called for more than a half-dozen tax measures affecting U.S. firms, including an increase in the corporate tax rate and subjecting the overseas earnings of businesses to higher tax rates.
Unlike the $1.9 trillion stimulus plan that passed in March, the cost of which was almost entirely added to the national debt, the White House has said it will seek to pay for the infrastructure plan through tax hikes on businesses and corporations.
Fifty-five corporations saw zero federal tax liability in 2020, according to a report this week by Institute on Taxation and Economic Policy, a left-leaning think-tank. The amount of corporate tax revenue raised by the government has fallen from above 2 percent of U.S. Gross Domestic Product before the GOP tax law to half that, the Treasury report says.
“Here you have 51 or 52 corporations of the Fortune 500 haven’t paid a single penny in taxes for three years. Come on, man. Let’s get real,” Biden said earlier this week, after walking off Marine One.
Biden’s plea arrived as House and Senate leaders forged ahead with their early work to translate his multi-trillion dollar blueprint into a legislative reality. The process of writing infrastructure reform into law is one that spans much of Congress, where many Democrat-led committees already have held hearings to examine federal funding for roads, bridges, pipes and other policy priorities including housing and climate change.
In doing so, Democratic leaders have echoed Biden’s pledge to work with Republicans and compromise. But they have also threatened to try and move forward without Republicans if they must. Democrats passed the $1.9 trillion coronavirus stimulus package in March without GOP support through a budget process known as reconciliation, which in the Senate only requires Democrats to attain 51 votes to pass legislation.
Democrats have signaled they could use reconciliation again to adopt some or all of Biden’s infrastructure reforms, seeking to bypass a potential Republican filibuster. They gained an additional political advantage on Monday, when the Senate’s parliamentarian appeared to open the door for the party to use reconciliation at least three more times than they initially anticipated between now and the 2022 midterms. So far, Senate Majority Leader Chuck Schumer has declined to say how, exactly, he plans to take advantage of the ruling.
“The American people want bold action to address our country’s many challenges, and Democrats now have more options to overcome Republican obstruction and get things done,” Sen. Ron Wyden (D-Ore.), the chairman of the Senate Finance Committee, said in a statement Monday heralding the announcement.
First, however, Democrats face the daunting task of passing major tax hikes to fund their infrastructure push. The centerpiece of Biden’s tax hikes is increasing the corporate rate from 21 percent to 28 percent, after President Trump’s 2017 tax law cut it from 35 percent to 21 percent. Trump also was forced to compromise on his tax proposal, as he insisted for months that the rate needed to be lowered to 15 percent. He eventually softened his proposal, but Biden appears to be signaling much faster than he is open to hearing other ideas.
The report released by Treasury also details more than $700 billion in new government revenue through revamping America’s international tax system. In particular, the plan would increase the global minimum tax paid by U.S. firms operating abroad from about 13 percent to 21 percent. It would also repeal provisions from the Republican tax law that the Biden administration says encourages outsourcing of U.S. manufacturing and production.
Parts of corporate America have appeared more open to Biden’s push than expected. John Zimmer, the CEO of the ride-share company Lyft, told CNN that the company supported the 28 percent corporate tax rate and Biden’s push for electrical vehicles and infrastructure. Amazon founder and CEO Jeff Bezos also said Tuesday that the e-commerce giant supports a rise in the corporate tax rate, while also calling for a “balanced solution that maintains or enhances U.S. competitiveness.” (Bezos is the owner of The Washington Post.) Still, Biden’s plans have been sharply criticized by American business groups and congressional Republicans.
“What the president proposed this week is not an infrastructure bill,” Sen. Roger Wicker (R-Miss.) said earlier this month. “It’s a huge tax increase, for one thing. And it’s a tax increase on small businesses, on job creators in the United States of America.”
The Treasury report included an analysis showing a rising share of income from multinational corporations ending up in tax havens, along with data showing only a handful of countries in the world collect less revenue from corporations than the U.S.
Conservatives have called these measures misleading. Donald Schneider, who served as chief economist to Republicans on the House Ways and Means Committee said the revenue declines are overstated due to temporary provisions in the GOP tax law. Schneider said the analysis also miss the rise in pass-through entities, which make the fall in corporate revenue appear larger than it actually is.
The administration has countered with estimates from Moody’s showing the spending from Biden’s infrastructure proposal would grow the economy by about 1.6 percent. The Treasury plan also calls for beefing up corporate tax enforcement at the Internal Revenue Service; shifting subsidies for fossil fuel production to clean energy production; and pushing a global minimum tax through international negotiations.
“By choosing to compete on taxes, we’ve neglected to compete on the skill of our workers and the strength of our infrastructure. It’s a self-defeating competition, and neither President Biden nor I am interested in participating in it anymore,” Yellen wrote in a Wall Street Journal op-ed announcing the plan. “We want to change the game.”