White House lists corporate tax offsets for Biden infrastructure plan

In brief

President Joe Biden today held an event in Pittsburgh to announce a $2 trillion “American Jobs Plan” focused on infrastructure and other spending initiatives, with the cost of his proposals to be offset by corporate tax increase proposals. In advance of the President’s remarks, the White House released an outline of specific infrastructure proposals and corporate tax increase offsets. 

The American Jobs Plan includes tax incentives for clean energy and domestic manufacturing, while the “Made in America Tax Plan” contains corporate tax increase proposals. The White House summary indicates that the Made in America Tax Plan is expected to increase federal revenues by over $2 trillion over 15 years to “more than pay” for the infrastructure package and reduce federal budget deficits. The corporate tax increase proposals include increasing the corporate income tax rate to 28% and several proposed changes to US international tax rules. 

The infrastructure and corporate tax increase plans announced today reflect key elements of President Biden’s “Build Back Better” plan that was announced during his presidential campaign. During a White House press briefing, administration officials indicated that tax increase proposals affecting high-income individuals would be proposed in coming weeks to offset the cost of other parts of President Biden’s campaign proposals for increased spending on childcare, education, expanded access to healthcare and targeted individual tax relief measures.

Observation: While there previously has been bipartisan support for some increased federal infrastructure spending, President Biden’s tax increase proposals will need the support of all 50 Democratic Senators and nearly all House Democrats to be enacted over the objections of Congressional Republicans. Moderate Democrats in the House and Senate may seek to scale back some of President Biden’s proposals and may seek to block others when Congress is expected to consider tax increase legislation later this year under “budget reconciliation” procedures.

Action item: Companies should be evaluating and modeling the potential effect of the infrastructure and corporate tax increase proposals being put forth by President Biden. Companies also should be communicating with policy makers about how specific proposals may affect their employees, job creation and investments in the United States.

Corporate tax increase proposals 

The Biden administration today identified several corporate tax increase proposals similar to measures that the President offered during his 2020 election campaign. According to the White House summary, President Biden is seeking to make the United States a leader in efforts to “end the race-to-the-bottom on corporate tax rates” and “discourage offshoring by strengthening the global minimum tax for US multinational corporations.” 

According to the White House summary, the proposed corporate tax increases include:

• Increasing the corporate tax rate from 21% to 28%
• Increasing the global intangible low-taxed income (GILTI) tax rate to 21%, applying GILTI on a per-country basis and eliminating the 10% deduction for qualified business asset investment (QBAI)
• Denying certain deductions to foreign corporations on payments "that could allow them to strip profits out of the United States if they are based in a country that does not adopt a strong minimum tax"

Observation: The White House summary states that this proposal addresses “an ineffective provision” of the 2017 Act and appears to replace the base erosion and anti-abuse tax (BEAT) with a provision targeted to payments made to companies based in countries that do not have a minimum tax on foreign earnings. Changes to the BEAT could potentially be motivated in part by a desire to align more closely with certain aspects of the OECD’s digital project. Treasury Secretary Janet Yellen recently stated that the United States is working with other OECD countries to reach an agreement that would set a global minimum tax rate.

Other tax-related provisions include:

• Preventing US corporations from “inverting or claiming tax havens as their residence"
• Denying deductions for expenses related to "offshoring" jobs and providing a tax credit for "onshoring" jobs
• Repealing the deduction for foreign derived intangible income (FDII) and using the resulting revenue to expand "more effective" R&D investment incentives
• Imposing a 15% minimum tax on large corporations' book income
• Eliminating tax preferences for fossil fuels and reinstating Superfund taxes
• Funding IRS corporate tax enforcement

Observation: The White House summary does not provide full details for the President’s proposed changes to the 2017 tax reform act. The Treasury Department currently is expected to release a “Green Book” technical explanation of the President’s tax proposals in late spring.

The takeaway

Companies should be evaluating and modeling the potential effect of President Biden’s infrastructure and tax increase proposals, and should be communicating with policy makers about how specific proposals may affect their employees, job creation and investments in the United States.  

For more information

For the White House summary of President Biden’s American Jobs Plan and the Made in America Tax Plan, click here.

For a transcript of the White House press briefing on the President’s proposals, click here.