Biden’s Gigantic, Enormous and Quite Large Infrastructure Plan
Is it big? Yes. Is it bold? Yes. And we can get it done.
Fact Check: these are all true.
At the Carpenters Pittsburgh Training Center, President Biden formally announced his $2 trillion plus “American Jobs Plan” (AJP) targeted at increasing growth in jobs for the US economy. This is not merely an infrastructure plan, but truly a wide ranging spending plan covering a gamut of goodies areas outside of roads, bridges and tunnels. Candidate Biden proposed many of these during the campaign and is following through on those promises. Unlike the stimulus plans passed over the last year, this spending plan has tax hikes to help pay for some of the outlays. Keep in mind, there will be another spending plan shortly on healthcare/human infrastructure and it will likely be similar in size. What follows is a brief look at the proposals.
Let’s start with the tax hike. Under the Tax Cuts and Jobs Act (TCJA), the corporate tax rate was cut from 35% to 21%. Remember, this is the corporate tax rate not the passthrough tax rate for LLCs and Subchapter S entities which flow to individual tax rates. Also, under TCJA, many deductions and offsets were eliminated to make the tax code more efficient and giving the actual tax a bigger bite. The goal of the TCJA was to make the US more competitive with foreign corporate tax rates around the world.
Currently, the US corporate combined federal and state tax rate is 25.8% according to the Tax Foundation and the graph above shows where we are right now compared to the rest of the world.
Biden’s plan is to raise the corporate tax rate to 28% and create a combined (federal and state) average of 32.4%, making the US uncompetitive again.
There are other provisions under the AJP like a 15% minimum tax on book income of large corporations and making it more difficult for US companies to invert, but raising the overall tax rate will have the biggest impact.