Here’s what you need to know about President Biden’s recently released $2 trillion jobs and infrastructure plan, what might be coming on proposed changes to corporate tax rates, and the environment in the U.S. Congress as we look ahead.
On 31 March, U.S. President Joe Biden released the American Jobs Plan, a package centered around jobs and infrastructure that aims to put $2 trillion to use over the next 15 years towards critical infrastructure while expanding manufacturing opportunities to create jobs. As the U.S. continues to make its way out of the economic damages wrought by the pandemic, Biden’s plan seeks to “reimagine and rebuild a new economy.” But how is Congress going to pay for the package? And would such legislation, if introduced in Congress, have the ability to move forward? Here’s what you need to know.
What’s is the Made in America Tax Plan?
The Biden Administration is proposing to move alongside the American Jobs Plan increases to corporate tax rates through the Made in America Tax Plan. This stems from a recent independent study which found that 91 Fortune 500 companies paid $0 in federal corporate taxes on U.S. income in 2018 because of the Tax Cuts and Jobs Act of 2017. President Biden wants to change corporate tax rates to raise $2 trillion over the next 15 years to pay for investments in infrastructure as well as other items, while creating jobs along the way.
Revenue raised from corporate tax rate increases will be used to fund critical investments in infrastructure, such as roads, bridges, and schools, as well as clean energy and transit projects, to “maintain the competitiveness of the United States and grow the economy.” Here’s how Biden’s American Jobs Plan breaks down:
- $621 billion to improve America's roadways, railways, and bridges with a focus on clean energy for a more efficient transportation infrastructure.
- $650 billion to rebuild American homes and school buildings while improving underground water infrastructure and expanding broadband access.
- $400 billion to boost the quality of life for the elderly and disabled.
- $300 billion to go toward research, development, and manufacturing with an emphasis on clean energy, including $100 million for worker training.
What are the proposed changes to corporate tax rates in the Made in America Tax Plan?
So how exactly does the Administration plan to change corporate taxation to pay for and support infrastructure and jobs in the American Jobs Plan? The Biden tax proposal would:
- Set the Corporate Tax Rate at 28 percent.
- Increase the minimum tax on U.S. corporations to 21 percent and calculate it on a country-by-country basis.
- Encourage other countries to adopt strong minimum taxes on corporations so that foreign corporations aren’t unfairly advantaged.
- Encourage foreign countries to not serve as tax havens.
- Prevent U.S. Corporations from inverting or claiming tax havens as their residence.
- Enact a minimum tax of 15 percent on large corporations’ book income to ensure that large, profitable corporations cannot exploit loopholes in the tax code without paying U.S. corporate taxes.
- Ramp up enforcement against corporations by closing tax loopholes and ensuring that the IRS has the resources to effectively audit and enforce tax laws.
What are the chances of these proposals moving forward in the U.S. Congress?
While all signs are pointing to a likely second reconciliation bill as a vehicle to move an infrastructure and jobs package forward, and possibly another corporate tax package forward with a simple majority vote in the U.S. Senate, nothing is yet set in stone. The likelihood that legislation that could pass the American Jobs Plan and the Made in America Tax Plan provisions without any Republican support is possible, but all Democrats would have to be onboard, although some Senators like Joe Manchin will not support any bills that don’t have Republican support.
Worldwide ERC® will be monitoring actions in the U.S. Congress and keep you abreast of any developments.
