While President Biden has many proposals aimed at increasing the supply of affordable housing, including tax credits, his plans to raise business taxes could hinder that goal.
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While Congress continues to debate how to pay for President Biden’s spending proposals in the fiscal year 2022 budget, it is useful to consider the economic impact of a range of financing options in addition to the President’s proposed tax increases.
While it is good that policymakers are taking the impact of the economy on tax revenue seriously, it is important to remember that the dynamic effect of increased spending would only offset a small portion of the total spending. In other words, new spending—like tax cuts—rarely pays for itself.
President Biden’s tax proposals released as part of his fiscal year 2022 budget would collect about $2 trillion in new tax revenue from businesses over 10 years. This new revenue would bring income tax collections on businesses as a portion of GDP to its highest level on a sustained basis in over 40 years.
Taxes are once again at the forefront of the public policy debate as legislators grapple with how to fund new infrastructure spending, among other priorities. Our tax tracker helps you stay up-to-date as new tax plans emerge from the Biden administration and Congress.
The Biden administration has suggested several tax increases for his infrastructure plan. Public infrastructure can help increase economic growth, but by raising taxes on private investment, the net effect on growth may be negative. However, tax options like retaining expensing for private R&D investment or making 100 percent bonus depreciation for equipment permanent would be complementary to the goals of infrastructure spending.
If Biden wants to reduce tax evasion, raising the corporate rate, increasing the incentives to engage in tax evasion, and creating a larger tax advantage to becoming a pass-through business is counterproductive.
Some lawmakers have expressed concerns about President Biden’s proposal to raise the federal corporate income tax rate from 21 percent to 28 percent, and instead suggest raising the rate to 25 percent.
There’s a useful contrast between two revenue options related to President Biden’s infrastructure push. The president’s American Jobs Plan includes a proposal to raise the corporate tax rate to 28 percent. Meanwhile, historically, the gas tax is the main revenue source for transportation funding.
In his first 100 days as president, Joe Biden has proposed more than a dozen significant changes to the U.S. tax code that would raise upwards of $3 trillion in revenue and reduce incentives to invest, save, and work in the United States.