Congress and Administration Continue Tax, Infrastructure, and Stimulus Negotiations
As reported in various media outlets, President Biden has proposed a $2.2 trillion spending package that would pay for traditional infrastructure items, like roads and bridges, in addition to other Administration priorities. The wide reaching “American Jobs Plan” would touch on everything from labor union elections, to schools, residential and commercial energy efficiency, clean energy production, climate change, electric cars, and more. The Administration proposes to pay for the Plan by increasing the corporate tax rate to 28 percent from the current 21 percent. Additionally, President Biden is expected to propose increasing the capital gains tax to 39.6% for those making $1 million or more and eliminating the stepped up basis for inherited assets in his address to Congress on Wednesday evening. Republicans have countered the Administration’s spending plan with a $568 billion proposal that targets improvements to traditional infrastructure components. The Republican plan includes $299 billion for repair and construction of highways and bridges; $61 billion for public transportation; $20 billion for Amtrak and other rail projects; $35 billion for the Environmental Protection Agency for drinking water and wastewater projects; $13 billion for highway and pipeline safety, as well as the transportation of hazardous materials; $17 billion for the U.S. Army Corps of Engineers for improvements for ports and waterways; $44 billion for airport improvements; $65 billion for broadband expansion; and $14 billion for water storage.
Given the even split in the Senate, with Vice President Harris giving the Democrats 51 votes, legislation will need to pass through the budget reconciliation process with every Democrat voting yes, or gain enough Republican support to receive 60 votes to be filibuster proof. One Democratic Senator, Joe Manchin of West Virginia, has publicly stated that he is not supportive of the proposed 28 percent corporate tax rate or the expansiveness of the Administration’s proposed spending bill. SLMA continues to work with business coalitions on the proposed tax increases while advocating for the increased utilization of wood products in infrastructure projects where appropriate. Of note, the Family Business Estate Tax Coalition, of which SLMA is a member, commissioned a study by Ernst and Young regarding the impact that repealing the stepped up basis would have on small businesses and employment throughout the country. The study, released this past Friday, found the following:
- 80,000 fewer jobs in each of the first ten years;
- 100,000 fewer jobs each year thereafter; and
- A $32 reduction in workers’ wages for every $100 raised by taxing capital gains at death.
It would also reduce GDP relative to the U.S. economy in 2021, by approximately:
- $10 billion annually;
- $100 billion over 10 years.