Biden's Tax, Infrastructure Plans: What to Expect
As Biden's $3 trillion infrastructure and economic packages come into focus, here's how he will likely try to finance them. But will Congress approve?
President Joe Biden’s anticipated $3 trillion infrastructure and economic plans — and expected tax-hike proposals to finance them — will spark market volatility until “a bill clearly comes into focus by late summer,” according to Greg Valliere, chief U.S. strategist for AGF Investments.
Plans to increase individual and corporate tax rates, as well as the global minimum tax and estate taxes, are expected. It is unknown how much revenue Biden intends to raise through tax hikes.
Will these measures pass? As it stands now, “the final outcome of this saga is unclear; again, the consensus is that Biden can get something but not all that he’s seeking now,” Valliere said Wednesday morning in his Capitol Notes email briefing.
“There will be leaks and deal-cutting and uncertainty for months to come,” which Valliere said is a likely recipe for market volatility.
The likely first priority for the administration will be “a targeted infrastructure package addressing road/bridges/utility repair, clean energy investment, enhanced broadband access, and potentially housing in the $1-1.5 trillion range,” Raymond James analysts noted in an email briefing Wednesday morning.
The “second stage” is likely to target “social infrastructure investments such as universal child care, tuition-free community college, and an extension of the expanded Child Care Tax Credit currently scheduled to expire at the end of this year through 2025,” the Raymond James analysts explained.
As for other tax changes, they’re “coming — but scope remains in flux,” the analysts said.
Senate Finance Committee Chair Ron Wyden, D-Ore, is preparing this week to release a proposal with adjustments to corporate taxes, the Raymond James analysts said.
Tax hikes on the very wealthy “are virtually certain, with the top rate rising from 37% currently to 39.6%, with fresh limits on deductions,” according to Valliere.
“The Biden plan apparently would tax capital gains as ordinary income — a total non-starter for Republicans, who also would oppose a hike in the estate tax,” Valliere said.
If a bill passes, the top corporate tax rate “is almost certain to rise, from 21% now to at least 25% or 26% in a final bill,” Valliere said.
Other corporate tax hikes may include raising the global minimum tax from about 13% to 21%; ending federal subsidies for fossil fuel companies; and forcing multinational corporations to pay the U.S. tax rate rather than the lower rates paid by their foreign subsidiaries.
Raymond James analysts also said “limited deductions for wealthy taxpayers, and adjustments to inheritance taxes” are under consideration.
More details on Biden’s plan are likely to emerge “in the coming weeks and a major sell by the Biden administration as part of President Biden’s planned State of the Union-type address to Congress later this spring (potentially early April),” the Raymond James analysts said.