President Joe Biden announced this spring that he plans to raise the corporate tax rate to help fund his more than $2 trillion infrastructure bill. Supporters of the plan argued that it would help support American workers and families because corporations would be putting money back into the U.S. economy.
Detractors of the higher tax rate, however, said that a greater tax burden on corporations could lead to job losses and a weakened economy. Under the Trump administration, the corporate tax rate was cut from 35% to 21%. Biden has announced he would increase the rate to 28%. Biden touted his plan as a way to help low- and middle-class Americans.
“I’m sick and tired of ordinary people being fleeced,” he said at an April event, during which he also criticized the Trump administration’s tax cuts as mostly benefiting the ultra-wealthy. Biden said he also supports a higher global corporate tax rate to prevent corporations from investing profits in overseas markets. Combined with the increased domestic tax rate on corporations, the two measures could fund Biden’s infrastructure package within 15 years, he announced.
The infrastructure plan, valued at more than $2 trillion, is broad in scope. It would fund construction and maintenance of traditional infrastructure — such as roads, bridges, drinking water and the electric grid — while also putting money into the country’s manufacturing industry and providing roughly $400 billion for home- and community-based services that the Biden administration calls the “care economy.”
It is “essentially a jobs bill,” White House Press Secretary Jen Psaki said in an April press briefing. “Our workers, our workforce is part of the backbone and the infrastructure of America’s economy and communities.”
Democratic leaders in the House and Senate support the bill. House Speaker Nancy Pelosi (D-Calif.) called for bipartisan support of the plan to build on the COVID-19 relief package to help bolster the American economy and address social welfare and climate issues. Senate Majority Leader Chuck Schumer (D-N.Y.), meanwhile, has weighed the possibility of passing the infrastructure package through budget reconciliation, a Senate procedure that allows legislation to move with just a simple majority, as a way to overcome opposition from Republicans.
Republicans in Congress, however, largely oppose the plan to raise the corporate tax rate, even though they have expressed interest in revitalizing American infrastructure. “I’d love to do an infrastructure bill,” Senate Minority Leader Mitch McConnell (R-Ky.) said during an event in his home state. “I’m not interested in raising taxes across the board on America. I think it will send our economy in the wrong direction.” McConnell credited the tax cuts made under the Trump administration with driving the economy to a 50-year high.
Breaking with party leadership, several Democratic lawmakers, including Sen. Joe Manchin (D-W.Va.), voiced opposition to raising the corporate tax rate to 28%. Manchin proposed instead to raise the rate to 25%, which he stated is the global average, and to close tax loopholes that benefit the wealthy. Corporations are split on what a higher tax rate might do to the global competitiveness of U.S. businesses.
Chamber of Progress, an industry group representing tech companies such as Amazon, Google and Facebook, came out in support of the higher rate, stating that it was a worthwhile trade-off to help industry through better infrastructure. The group’s founder and CEO Adam Kovacevich also acknowledged that the infrastructure plan will support priorities of the tech industry, such as expanding broadband availability and improving clean energy.
A survey of American CEOs by the Business Roundtable, however, found that 98% of them believe the increased tax rate would have a moderately or very severe effect on their company’s global competitiveness. Seventy-one percent, for example, reported that the increased tax rate would negatively affect their ability to hire new employees.
“This survey tells us that increasing taxes on America’s largest employers would lead to a reduced ability to hire, slower wage growth for workers and reduced investments in research and development — all key components needed for a robust economic recovery,” Business Roundtable President and CEO Joshua Bolten said in a statement.
Biden has said that he’s willing to compromise with Republicans, possibly on a lower corporate tax rate than he’s proposed, and he hopes to see the plan passed by Congress this summer.
For more background, see the January 2018 issue of Congressional Digest on “Tax Reform.”
