President Biden announced a new infrastructure plan last week that he has dubbed “a once-in-a-generation investment in America.” Biden promises that this infrastructure plan will create millions of good-paying jobs, and that it is the largest investment in American jobs since World War II. The $2.3 trillion plan will undo much of former President Trump’s legislative efforts to cut corporate taxes, as the proposal is paid for by 15 years of higher taxes on corporations. The team at Evolution Tax and Legal is breaking down what you need to know about President Biden’s latest infrastructure plan.
Biden introduced the plan on March 31, 2021 with the promise that the infrastructure proposal would create millions of jobs for Americans, while improving the infrastructure that many politicians have hoped to work on for years. The plan proposes an increase in the corporate tax rate, which will allow the administration to fund the spending proposals laid out in the plan. Since the 2017 passing of Trump’s Tax Cuts and Jobs Act, the corporate tax rate has been 21%. The infrastructure plan aims to raise the rate to 28%, while increasing audits of corporations to hold them accountable. In order to keep companies from shifting their operations overseas to escape the raised tax rate, the administration plans to impose a 21% global minimum tax rate on the book income of corporations, although this minimum could be as high as 28% depending on the national corporate tax rate. The plan likely also includes a doubling of the tax on income earned by corporate subsidiaries.
The tax raises are meant to raise the money necessary to accomplish the spending proposals Biden spoke of in his infrastructure plan introduction speech, while reducing the deficit moving forward. The administration has big plans for the money they plan to raise through the increased corporate taxes, and the plan includes a breakdown of their spending proposals.
The spending proposals can be broken down into various categories of national infrastructure. This includes transportation, where Biden aims to modernize 20,000 miles of highways and roads, repair 10,000 bridges, and build a network of over 500,000 electric vehicle chargers across major roads by the year 2030. This will not only revitalize the infrastructure already in place, but reduce the reliance on fossil fuels that contribute to climate change and pollution. The plan also included more than $200 billion in tax credits and grants to encourage the building and improvement of affordable housing. This totals as one of the largest spending proposals included in the plan. The plan addresses the need for in-home care by including $400 billion to expand access to caregiving for those who have disabilities and the elderly, as well as improving benefits and pay for caregivers.
The plan also addresses the focus of Biden’s speech: American jobs. It includes a proposal of more than $500 billion to invest in the manufacturing sector, research and development, and worker training and development. The goal of these investments in innovation and jobs aims to help Biden achieve his goal of having Americans compete with China and other rivals to dominate manufacturing technology and other innovative industries. This will hopefully bolster the nation’s competitiveness in things like semiconductors and 5G.
The plan was met with opposition by Republic party leaders and businessmen and women alike. Republican Senate Leader Mitch McConnell stated his opposition and labeled the plan as an excuse for tax hikes. While the business community is glad to see infrastructure become a top priority, they are displeased with the proposed tax increases as a means to pay for it. Democratic Party members are glad to see a bold plan being implemented in the face of infrastructure and unemployment issues in the country, although they have their own set of demands that will need to be met in order to gain their approval of the plan.
Many democrats have come together to announce they will not support the bill unless it reverses the $10,000 cap on individuals’ local and state tax deductions, which was put in place during the Trump administration. The infrastructure bill does not address the cap thus far, but with the Democrat’s power to make or break any bill that goes through the House, these demands may be considered by the administration moving forward.
The discussion of infrastructure spending has long been a debated topic: where should the money come from and what it should be spent on to see the most return. Many economists state that infrastructure is often an industry that pays for itself, and a study conducted in 2020 by economist Beth Ann Bovino determined that a $2.1 trillion investment in infrastructure could see as much as a $5.7 trillion addition in income to the entire economy over the course of a decade. Many politicians on both sides of the aisle agree that investing in infrastructure is a valuable next step in America’s economic recovery, however where the money to invest should come from will continue to be a debated issue as Biden’s infrastructure bill moves its way through the government.
At Evolution Tax and Legal, our team has the expertise and experience to help you navigate your financial situation. We provide the same level of expertise as a large accounting firm, with the customer service of a small agency. Whether you’re looking for someone to help navigate the murky waters of international tax, or meet the U.S. tax deadline, Evolution Tax and Legal can help. Contact our team today to learn more.