US President Joe Biden unveils major infrastructure plan amid opposition to tax hike

April 01, 2021 | Updated 3:57 pm

US President Joe Biden unveils major infrastructure plan amid opposition to tax hike US President Joe Biden (Image courtesy: ANI)

Washington: U.S. President Joe Biden on Wednesday unveiled a 2-trillion-U.S.-dollar infrastructure plan, touting it as a “once-in-a-generation” investment in America and proposing a corporate tax hike to offset the cost.

The plan, widely welcomed by Democrats, is expected to face a tough fight in Congress, as Republicans have flatly rejected any increase in taxes. Meanwhile, concerns over mounting debt and inflationary risks are expected to further complicate the plan’s prospects.

Reviving “Crumbling” Infrastructure

The proposal, dubbed the American Jobs Plan, includes 621 billion dollars to improve transportation infrastructure, such as roads, bridges and airports, with 174 billion dollars allocated to electric vehicles.

The plan also sees 300 billion dollars earmarked to revitalize American manufacturers and small businesses, 213 billion for housing, 180 billion to boost the country’s research and development, 100 billion in high-speed broadband, and 100 billion to modernize schools and early learning facilities.

“What I am proposing is a one-time capital investment of roughly 2 trillion dollars in America’s future, spread largely over eight years,” Biden said in a speech in Pittsburgh, Pennsylvania, where he kicked off his presidential campaign.

“It will generate historic job growth, historic economic growth, help businesses to compete internationally, create more revenue as well,” Biden said, noting that among the highest-value investments would be in America’s “crumbling” infrastructure.

Jeffrey Sachs, an economics professor at Columbia University and a senior UN advisor, recently told Xinhua that he strongly supports the long-term package, as investing in infrastructure builds “the base of the economy.”

“The United States hasn’t done this properly in a long time … The United States needs to focus on infrastructure investment,” he said.

Tax Hike could be Tough Sell

To offset the plan’s massive costs, Biden proposed increasing the corporate income tax rate to 28 per cent, up from the current 21 per cent, attempting to partially reverse the tax cuts under the Donald Trump administration.

The tax reform proposal will also raise the global minimum tax on U.S. multinational corporations from 10.5 per cent to 21 per cent, in a bid to discourage offshoring and create incentives for investment in the United States.

Biden’s proposal is widely welcomed by Democrats, with Senate Majority Leader Chuck Schumer and Elizabeth Warren quickly voicing support. Republicans lashed out at the plan.

“Rolling back Right to Work laws. Imposing the biggest new tax hikes in a generation — killing jobs and slowing wage growth when workers need a fast recovery,” said Senate Minority Leader Mitch McConnell in a tweet, who recently said that he thinks no Republican would vote in favour of raising taxes to pay for the infrastructure plan.

Within the Democratic Party, the consensus is not yet in place.

Joe Manchin of West Virginia has indicated support for raising the corporate tax rate to 25 per cent, while Democrat Alexandria Ocasio-Cortez argued that the 2-trillion-dollar plan is “not nearly enough.”

“Just as difficult as financing the project will be garnering political support in a U.S. Senate that is controlled by Democrats under a 50-50 split,” Joseph Brusuelas, chief economist at accounting and consulting firm RSM US LLP, wrote in an analysis.

Brusuelas said without any significant GOP support, Democrats will need to use budget reconciliation to move the legislation, a procedure adopted to pass the 1.9-trillion-dollar relief bill in the Senate with a simple majority, instead of the 60-vote threshold.

In the coming weeks, Biden is expected to unveil another major spending plan focused on expanding health care, child care and education. The two packages combined could cost over 3 trillion dollars, according to U.S. media reports.