proposed tax increases on corporations as part of a $2.3 trillion infrastructure plan has drawn a skeptical reaction from some Democrats, who instead favor borrowing money to pay for the investments or raising other levies, like the gasoline tax, to do so.
The proposal would raise the corporate tax rate to 28% from 21% and increase taxes on companies’ foreign earnings. The White House said the tax increases would, over 15 years, cover the cost of the $2.3 trillion package, which puts money toward improving roads, bridges, and transit systems, along with expanding broadband access and myriad other efforts.
Republicans have widely rejected Mr. Biden’s proposed tax increases, but some Democrats are raising their own questions about the plan. With very narrow majorities in the House and Senate, Democrats will need nearly unanimous support in their party to advance the package without Republican votes, and many lawmakers are floating potential changes to the plan.
Rep. Peter DeFazio
(D., Ore.), the chairman of the House Transportation and Infrastructure Committee, said he didn’t think paying for the full cost of the plan through tax increases was necessary. Mr. DeFazio said he would support an increase in the gas and diesel tax to pay for the new investments over time, as well as more borrowing to cover part of the cost.
“When you’re borrowing money for current consumption versus borrowing money for investment it’s a different thing,” he said.
Mr. Biden’s plan doesn’t include any increases in the gasoline tax, which the White House has opposed as a regressive tax. The federal tax on gas currently stands at 18.4 cents a gallon.
The early questions from Democrats reinforce expectations that this next wave of legislation won’t move nearly as quickly as the $1.9 trillion Covid-19-aid plan, almost entirely deficit-financed, that Mr. Biden signed into law last month. Lawmakers are preparing for a monthslong process, with an eye toward passing the plan this summer.
(D., Calif.) praised Mr. Biden’s plan as a way to push corporations to pay a fair share in taxes.
Rep. Richard Neal
(D., Mass.), the chairman of the House Ways and Means Committee, said he expects Congress to make changes to Mr. Biden’s plan.
“I think that Congress will offer some suggestions. We will accept some of what he is proposing but I also think timing here is a critical issue,” he said.
Rep. Josh Gottheimer
(D., N.J.) said he wanted to see the Biden administration consider alternatives to the corporate tax increases to try to court Republican support. “I think on the corporate piece, if it’s a nonstarter for the Republicans and it means we can’t get bipartisanship, I’m eager to hear their other ideas,” he said, listing the gas tax as one possibility.
Most of us believe at a certain point you do have to pay for what you’re getting.
Mr. Gottheimer and other lawmakers from the New York area have also insisted that Congress restore the deduction for state and local taxes, which was capped at $10,000 in the 2017 tax law. Mrs. Pelosi said she was sympathetic to that idea, while the White House has said lawmakers should propose a way for paying for the deduction.
Some Republicans have indicated they are open to raising the gas tax and to putting into place a tax based on the miles that a vehicle travels, to capture revenue from electric vehicles that don’t use gasoline. The Biden plan includes $174 billion for electric vehicles.
Rep. Sam Graves
(R., Mo.), the top Republican on the House Transportation and Infrastructure Committee, said a vehicle-miles traveled tax was an important measure to finance infrastructure spending on a continuing basis. He said he opposed paying for the plan by borrowing.
“We have to make sure we are putting money into the trust fund,” he said. “Electric vehicles are a perfect example of a vehicle system that doesn’t pay into the use of that road.”
(D., Calif.) said lawmakers would need to craft a new way to capture revenue from electric vehicles. “We have to wrestle with that and it’s something that needs to be done with this package,” he said.
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But other Democrats, in line with the White House, don’t support raising the gas tax or collecting revenue from electric vehicles, noting the taxes hurt lower income people harder and could also discourage greener transport.
“Gas taxes are regressive in terms of who pays them, and on the other hand we need to create incentives to move towards [electric vehicles], So I think a miles traveled tax does not give people incentives to get an electric car,” said Rep.
“There have been some proposals out there about user fees or gas taxes, essentially,” said White House press secretary
last week. “We don’t agree with that,” she said, while adding the White House was open to hearing ideas.
If Democrats forgo some of the tax increases and instead plan to borrow to pay for some of the plan, they will likely face another debate about the wisdom of taking on more debt. After more than $5 trillion in spending on coronavirus relief, debt levels as a percentage of gross domestic product in the U.S. have reached levels not seen since World War II.
“We’re willing to trust
that we’re not at the brink of a hyperinflation risk, but maybe let’s not go that much farther,” said
Rep. Don Beyer
(D., Va.), a member of the House Ways and Means Committee and the chairman of the Joint Economic Committee. “Most of us believe at a certain point you do have to pay for what you’re getting.”
—Richard Rubin contributed to this article.
Write to Andrew Duehren at [email protected]
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