President Joe Biden on March 31 announced a $2 trillion "American Jobs Plan" focused on infrastructure and other spending initiatives, including tax incentives for clean energy and domestic manufacturing. He also proposed a 'Made in America Tax Plan' containing corporate tax increase proposals designed to offset the costs of the American Jobs Plan infrastructure spending. In advance of the President’s remarks, the White House released an outline of specific infrastructure proposals and corporate tax increase offsets.
Action item: These proposals would have broad economic impacts across sectors. Some businesses may benefit from enhanced or new credits or similar incentives, while many others may face potentially significant tax increases. Given the range of potentially significant consequences, businesses should analyze these proposals and model their impact. Businesses also should consider potential changes to their manufacturing or operating models consistent not only with the specific tax incentives under consideration but also from the perspective of active stakeholders — both shareholders and customers — increasingly interested in the actions a business may be taking or considering in the environmental area. Many businesses will want to consider how to engage with policymakers on these taxes and ESG issues.
This PwC Insight focuses on the tax-related aspects of President Biden’s plan related to environmental, social, and governance (ESG) issues.
According to the ‘fact sheet’ released by the White House, the President’s plan includes the following items aimed at the following goals:
The American Jobs Plan features a wide array of proposals that, if enacted, likely would encourage investment in lower-carbon technologies and other elements of infrastructure intended to move the economy toward ESG goals. It would represent a significant step towards widespread adoption and promotion of these technologies by businesses and individuals, and it would help meet the various climate-related goals adopted by the administration, including those set forth in the Paris Climate Accords.
However, as proposed, these incentives would have significant costs, and President Biden proposes to finance the cost of his proposals with broad tax increases on businesses that could dampen business investment and employment in other parts of the economy. The tax offset provisions are similar to those proposed during Biden’s presidential campaign, and more details are expected in the near future (for a summary of the tax proposals as currently set forth, see the March 31 PwC Insight). Companies should model and compare their anticipated benefits from the tax incentives with their expected costs from the offsetting tax increases.