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As President Biden officially unveiled a $2 trillion infrastructure plan Wednesday, leading business groups delivered a tepid response to the ambitious legislation—welcoming its spending on needed improvements to America’s public infrastructure but balking at the significant corporate tax hikes needed to finance the proposal.
Biden’s plan—the first of two separate infrastructure proposals expected from the White House—calls for trillions of dollars of new investment to modernize the America’s roads, bridges, and railways; improve the country’s electric grid, water systems, and broadband networks; and create new jobs in the manufacturing and clean energy sectors.
To pay for that outlay, the administration is calling for up to $2 trillion in corporate tax increases over a period of 15 years by hiking the corporate tax rate to 28% (from 21% currently) and raising taxes on U.S. companies’ foreign profits. The moves would reverse many of the generous corporate tax cuts enabled by President Trump’s Tax Cuts and Jobs Act of 2017, which slashed the corporate tax rate from 35%.
While embracing the proposal’s investments in infrastructure, top business groups expressed their opposition toward the White House’s planned tax hikes, which they claim would counteract the economic stimulus sought by the infrastructure bill.
In a statement, representatives for the Business Roundtable, which is comprised of CEOs from major U.S. companies, noted that the group “has long called for infrastructure investment as essential to economic growth.” But Business Roundtable president and CEO Joshua Bolton stressed that the group “strongly opposes corporate tax increases as a pay-for for infrastructure investment,” and said they would create “new barriers to job creation and economic growth.”
The U.S. Chamber of Commerce echoed that sentiment, noting that the pro-business lobbying group had previously signed onto a coalition letter calling for a “fiscally and environmentally responsible infrastructure package” to be enacted by July 4 of this year. But though it applauded the Biden administration “for making infrastructure a top priority,” the group deemed the White House’s tax proposal “dangerously misguided when it comes to how to pay for infrastructure.”
Neil Bradley, executive vice president and chief policy officer for the Chamber, said in a statement that corporate tax hikes would “slow the economic recovery and make the U.S. less competitive globally—the exact opposite of the goals of the infrastructure plan.”
Despite the infrastructure plan promising to invest hundreds of billions of dollars into the U.S. manufacturing sector—including $50 billion toward bolstering the domestic semiconductor chip industry—the National Association of Manufacturers also voiced its disapproval at the proposed tax increases.
“Raising taxes on manufacturers would fundamentally undermine our ability to lead this recovery,” NAM president and CEO Jay Timmons said in a statement. Though noting that the manufacturing industry group “believe[s] strongly in bold infrastructure investment,” Timmons said the corporate tax hikes would “turn back the clock to the archaic tax policies that gave other countries an advantage over America.”
NAM cited the economic benefits of Trump’s 2017 tax cuts on the manufacturing sector, claiming that it helped create 263,000 new U.S. manufacturing jobs in 2018 and triggered a corresponding increase in manufacturing wages and capital spending. “Raising taxes on manufacturers here at home would jeopardize all of that and make it more difficult for them to compete in the global economy—putting investment, jobs, and livelihoods at risk,” Timmons said.
Despite business groups’ wariness at the proposed tax increases, stocks mostly rose Wednesday on the news of Biden’s infrastructure package. The S&P 500 notched up 0.4% and the Nasdaq climbed 1.5%, while the Dow Jones Industrial Average slipped less than 0.3%.
