President Biden has unveiled a $2.2 trillion grab bag of liberal spending projects creatively branded as an “infrastructure” initiative. The words “invest” and “investment” may appear 160 times in the American Jobs Plan, yet its largest proposal is $400 billion for long-term care for the elderly and disabled, which—whatever its merits—has nothing to do with infrastructure. Same with the proposed billions to support community violence prevention programs, a $10 billion “Civilian Climate Corps” (duties include “advancing environmental justice”), and a proposal to eviscerate state right-to-work laws. Highways, roads, and bridges would receive just $115 billion, or 5 percent of all spending.
The forthcoming release of the “human infrastructure” portion of the proposal is expected to push the total price tag as high as $4 trillion—combining with the pandemic bills to total nearly $10 trillion in new federal spending enacted in one year. And Biden has still promised at least $4 trillion more in new spending in areas such as health care and Social Security.
There is no plausible—or wise—package of taxes that could finance all this new spending. Still, Biden proposes $1.5 trillion in new corporate taxes that dwarf the $300 billion in net corporate tax cuts (over 10 years) enacted in the 2017 Tax Cuts and Jobs Act. That law reduced the corporate tax rate from 35 percent to 21 percent, but offset most of those savings by curtailing key business tax preferences. The president would raise the corporate rate back to 28 percent—restoring America to the highest rate in the OECD—without giving back the tax deductions. Moreover, the president would severely weaken the 2017 tax reforms that finally gave U.S. multinational corporations a level playing field when competing internationally. Now, once again, American companies abroad may face higher tax rates than our global competitors.
Even fully paying for this legislation would not make it fiscally responsible. Using nearly the entire universe of plausible corporate tax increases to finance this initiative leaves few options to pay for the remaining Biden agenda, or deal with the underlying $16 trillion baseline deficit during the next decade. Taxing wealthy families would raise much less revenue than advocates wish to believe, and after that we’re left taxing the middle class to close the surging red ink.