The corporate tax proposals in President Biden’s infrastructure plan would raise revenues by $2.1 trillion over 10 years, according to an analysis by the Penn Wharton Budget Model (PWBM) released Wednesday.
Biden last week unveiled a proposal that calls for $2.25 trillion in spending over eight years on investments in areas including transportation, drinking water systems, broadband, affordable housing, school and child care facilities, and workforce development programs.
The White House is also calling for $400 billion in renewable energy tax credits that the administration has yet to detail, for a total of $2.7 trillion in federal spending, PWBM said, citing reporting by The Washington Post.
The White House proposes to pay for the overall package by raising taxes on corporations, including an increase in the corporate tax rate from 21 percent to 28 percent, an increase in the rate for a minimum tax on corporations’ foreign earnings and the creation of a minimum tax on large corporations’ income as it’s reported on financial statements.
The administration has said that it thinks the financing proposals would raise more than $2 trillion over 15 years. PWBM estimated that the tax proposals would raise about $2.1 trillion from 2022 to 2031 and $3.6 trillion from 2022 to 2036.
PWBM said its revenue estimate of Biden’s tax proposals is at the lower end of what might be raised from the plan, since some of Biden’s proposals lacked enough detail for the researchers to model. For example, PWBM did not have enough information to provide a revenue estimate for a proposal to increase tax enforcement against corporations.
The spending and tax portions of Biden’s plan combined would increase the federal debt by 1.7 percent, compared to the current-law baseline, by 2031, because the new spending would exceed the amount of new revenue raised. But because the spending would end after eight years while the tax increases would continue, the plan would lower government debt by 6.4 percent in 2050 compared with the current-law baseline, PWBM researchers said.
The group estimated that gross domestic product would be 0.9 percent lower compared to the baseline in 2031, and 0.8 percent lower in 2050.
“Despite the decline in government debt, the investment-disincentivizing effects of the [American Jobs Plan’s] business tax provisions decrease the capital stock by 3 percent in 2031 and 2050,” the authors of the analysis wrote. “The decline in capital makes workers less productive despite the increase in productivity due to more infrastructure.”