April 6, 2021

What’s in Biden's Infrastructure Plan and How He Proposes Paying for It

On March 31, 2021, President Biden released details for a proposed American Jobs Plan — a nearly $2.7 trillion package aimed at addressing a range of issues, including transportation and other infrastructure, climate change, caregiving, and housing. If approved by the Congress, the sweeping package would represent one of the largest federal investments in the nation’s infrastructure in history — though the scope of the proposal goes far beyond what is traditionally thought of as “infrastructure.” What’s more, the administration has proposed changes to corporate tax policy as a means of fully offsetting the cost of the package.

Let’s take a closer look at the key components of the American Jobs Plan, as well as the potential pay-fors that have been proposed.

What Is Included in the American Jobs Plan?

The American Jobs Plan would be a massive investment in a range of national priorities. In addition to spending on transportation infrastructure like roads and bridges, the package aims to address issues such as clean drinking water, electric grid improvements, high-speed internet, racial and economic inequality, affordable housing, job training, and expanded access to home and community care for the elderly and individuals with disabilities.

The proposed spending in the American Jobs Plan covers an eight-year window and is broken down in the following ways:

$621 billion for transportation infrastructure, including:

  • $174 billion to increase the U.S. market share of electric vehicles
  • $115 billion to modernize the nation’s bridges, highways, and roads
  • $85 billion to modernize and expand existing public transit systems
  • $80 billion to invest in passenger and freight rail services
  • $50 billion to invest in disaster resilience

$590 billion for domestic manufacturing, job training initiatives, and research and development:

  • $310 billion in funding for domestic manufacturing, including semiconductor and clean energy manufacturers
  • $180 billion to bolster research and development efforts
  • $100 billion for workforce development and retraining programs

$400 billion in caretaking investment, primarily to:

  • Expand access to home and community-based services, as well as to long-term care services under Medicaid
  • Put in place an infrastructure to create well-paying caregiving jobs

$328 billion for improved housing, schools, childcare facilities, and federal buildings, including:

  • $126 billion to build affordable, energy-efficient housing units
  • $100 billion to upgrade and build new public schools
  • $40 billion to improve public housing

$311 billion to invest in broadband, the national electric grid, and clean drinking water, including:

  • $100 billion to expand access to high-speed broadband internet
  • $100 billion to invest in the nation’s power structure
  • $66 billion to upgrade the drinking water supply and monitor the water’s cleanliness
  • $45 billion to replace all lead pipes and service lines

In addition to $2.3 trillion in proposed direct federal outlays, the American Jobs Plan also includes an additional $400 billion in estimated clean energy tax breaks, bringing the total cost of the package to roughly $2.7 trillion.

PPP loans assisted small businesses from various sectors

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How Is the American Jobs Plan Paid For?

The administration has proposed fully offsetting the spending in the American Jobs Plan through a range of corporate tax increases and policy changes. Such proposals in the Made in America Tax Plan could generate enough new revenues to fully pay for the president’s infrastructure package in 15 years and reduce deficits in subsequent years.

According to estimates from the Biden administration, the policies outlined in the Made in America Tax Plan could raise nearly $2.8 trillion over 15 years, which would be enough to offset the $2.7 trillion in spending over eight years from the American Jobs Plan. Central components of the administration’s proposed tax policy changes are projected to have the following revenue effects over the 15-year period:

  • $1.3 trillion from increasing the statutory corporate income tax rate to 28 percent, a 7-percentage point increase from its current level of 21 percent. (The current level was lowered from 35 percent as part of the 2017 Tax Cuts and Jobs Act.)
  • $750 billion by imposing a 21 percent global minimum tax for U.S. multinational corporations to be calculated on a country-by-country basis in order to discourage offshoring. The Biden administration also plans to encourage other countries to impose a similar tax to stop certain countries from becoming tax havens.
  • $400 billion by eliminating the deduction for Foreign-Derived Intangible Income, which is income generated through the sale of goods and services overseas that are attributable to U.S. patents, trademarks, and copyrights.
  • $200 billion by enacting a 15 percent minimum tax on corporate “book” income, or the amount of income corporations publicly report to shareholders.

Other key provisions in the Made in America Tax Plan include eliminating tax preferences for fossil fuels, making sure polluting industries pay for environmental cleanup, and investing in the Internal Revenue Service to ensure it has the resources it needs to enforce the new corporate tax policies.

Looking Ahead

Infrastructure is widely considered to be a policy area with an opportunity for bipartisan legislation, and most economists agree that spending targeted for productive uses in our economy can be a worthwhile investment in our future. It is a positive sign that officials are pursuing a way to pay for their broad and diverse priorities. However, we are at the initial stages of the process, and it remains to be seen how lawmakers in Congress will react to the bill’s size, the priorities within it, and the structure of its pay-fors in the form of tax increases.


Related: Here's Everything Congress Has Done to Respond to the Coronavirus So Far



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