President Biden said Wednesday he’s willing to scale back a proposed corporate tax increase in his massive infrastructure plan amid resistance from a key Senate Democrat and a new study that said the plan would sap wages and economic growth in the long run.
Mr. Biden challenged opponents of the $2.25 trillion plan to put up or shut up on outlining their own ideas, while the Treasury Department projected the broader plan translates to roughly $2.5 trillion in tax hikes over 15 years.
“I’m wide open, but we got to pay for this,” Mr. Biden told reporters when asked about a corporate tax rate lower than the 28% that is in his plan. “I’ve come forward with the best, most rational way — in my view, the fairest way — to pay for it. But there are many other ways as well, and I’m open.”
The president said he plans to meet with any Republicans who want to negotiate in good faith and that the proposal he laid out last week will almost certainly change as it makes its way through Congress.
“I am prepared to work — I really am,” Mr. Biden said. “But to automatically say that the only thing that’s infrastructure is a highway, a bridge or whatever — that’s just not rational.”
Republicans and some Democrats have criticized the proposal for spending only a small percentage on building and fixing roads and bridges — the types of projects generally accepted as traditional infrastructure spending.
“An infrastructure package should be bipartisan, flexible and paid for, not a vehicle for Green New Deal priorities and progressive giveaways,” Sen. Cynthia Lummis, Wyoming Republican, said on Twitter.
Mr. Biden said the definition of “infrastructure” is constantly evolving, noting that there were periods in U.S. history when trains and highways weren’t considered infrastructure, either.
“We don’t just fix for today — we build for tomorrow,” Mr. Biden said. “The idea of infrastructure has always evolved to meet the aspirations of the American people and their needs. And it’s evolving again today.”
The spending side of the plan includes $620 billion for transportation infrastructure, $650 billion for universal broadband, clean water, upgrades to the electric grid and affordable housing, $400 billion for caregiving initiatives for seniors and the disabled, and $580 billion for research and development, manufacturing and training.
Mr. Biden wants $115 billion to go toward modernizing bridges, highways, roads and streets that are in most need of repair, according to the White House.
The Treasury Department on Wednesday released more details on Mr. Biden’s tax increases to pay for the plan, changes that would generate an estimated $2.5 trillion in revenue over 15 years.
The bulk of the spending, meanwhile, would go out the door over eight years, giving future lawmakers the opportunity to roll back the tax increases that would theoretically fund the proposal.
Mr. Biden wants to increase the U.S. corporate tax rate from 21% to 28%, impose new global minimum taxes on corporations, set a minimum 15% tax on income that large corporations report to their shareholders, and cut tax breaks for fossil fuels, among other changes.
The Treasury report also called for a boost in IRS funding so agents can be more aggressive in trying to weed out tax cheats.
Mr. Biden re-upped his vow not to increase taxes on people earning less than $400,000 per year as part of his proposals.
“I’m not trying to punish anybody, but damn it — maybe it’s because I come from a middle-class neighborhood — I’m sick and tired of ordinary people being fleeced,” the president said.
Experts have cast doubt on whether an increase in the corporate tax rate can avoid hitting middle-class families’ utility bills and retirement accounts, even if individuals aren’t seeing a direct hike in their marginal tax rates.
Though not officially part of his plan, Mr. Biden also listed increasing the top individual income tax rate from 37% to 39.6% as another possible revenue-raiser.
The president’s infrastructure and tax proposals would shrink the economy by about a percentage point in the long run, largely because of the business tax changes, according to projections from the Penn Wharton Budget Model released Wednesday.
Compared to a baseline scenario, overall gross domestic product would be 0.9% lower in 2031 and 0.8% lower in 2050, driven in part by the “investment-disincentivizing effects” of the business tax increases in the plan, according to the study.
“The decline in capital makes workers less productive despite the increase in productivity due to more infrastructure, dragging hourly wages down by 0.7% in 2031 and 0.8% in 2050,” the study concluded.
Sen. Joe Manchin III, West Virginia Democrat, had already signaled he did not support increasing the corporate tax rate to 28%, all but dooming that part of the proposal in a chamber that is split 50-50 between Democrats and Republicans.
Congressional Republicans have signaled that they have no appetite to make major revisions to their 2017 tax law, which cut the corporate tax rate from 35% to 28% and slashed individual rates across the board.
Democrats would be able to muscle through Mr. Biden’s spending proposals without GOP support thanks to the tie-breaking vote of Vice President Kamala Harris.
Sen. Chris Coons, a Delaware Democrat and top Biden ally, said Wednesday he could envision broader support for a smaller package totaling hundreds of billions of dollars.
“Without getting into the details of any particular conversation, several fairly senior Republicans have surprised me by saying they’d be willing to vote for something up to a trillion dollars,” Mr. Coons said at an event hosted by Punchbowl News. “And they’re willing to raise some taxes to pay for it.”
He said there’s some GOP support for increasing the federal gasoline tax or imposing a new “vehicle miles traveled fee,” though those plans were not in the Treasury Department’s outline Wednesday.
Liberal economists say the broader package is necessary to close an infrastructure shortfall, confront climate change and reverse the 2017 tax law, which they say did not have its intended effect.
“It’s not small, but the idea [that] it’s some crazy number that Joe Biden and his wacko lefty aides came up with — that’s nonsense,” said Dean Baker, senior economist at the Center for Economic and Policy Research.