biden corporate tax hike
© Reuters
President Joe Biden vowed on Wednesday to make companies like Amazon pay their fair share in taxes to fund his ambitious US$2 trillion infrastructure plan.
President Joe Biden's plan to raise the corporate tax rate by 7 percentage points has generated growing opposition in the business world and among some lawmakers on Capitol Hill.

Biden hopes to raise the corporate tax rate from 21% to 28% in order to help fund his more than $2 trillion infrastructure spending package. The American Jobs Plan also increases the global minimum tax applied to U.S. corporations by increasing it from 13% to 21% and aims to generate more revenue by cracking down on tax avoidance by companies with foreign investments.

Matthew Dickerson, the director of the Grover M. Hermann Center for the Federal Budget at the Heritage Foundation, told the Washington Examiner on Tuesday that the proposed tax changes would slow economic growth and "threaten America's global competitiveness."

Dickerson said during a phone interview that he thinks the timing of Biden's tax hike plan will further hamper U.S. efforts to recover from the economic ills of the COVID-19 pandemic.

The corporate tax rate sat at 35% from 1993 until it was lowered to 21% in 2017 as part of the Republican Tax Cuts and Jobs Act. Dickerson said that, as a result of the change, business investment went up, and wages went up, but he fears that if the rate is raised to 28%, it would put the U.S. in a "really dubious position of once again having one of the highest corporate tax rates on job creators amongst our international competitors."
biden corporate tax hike
© Tax Foundation
He added that the tax would be passed on to middle-class workers in the form of lower wages over time and that consumers would see it reflected in higher purchase prices.

The U.S. Chamber of Commerce and Business Roundtable have also rejected Biden's call to raise the corporate tax rate.

The Chamber applauded the drive to improve the "crumbling" U.S. infrastructure but said that raising taxes would result in the "exact opposite" of the administration's goal for the plan by slowing the country's economic recovery, reducing global competitiveness.

"However, we believe the proposal is dangerously misguided when it comes to how to pay for infrastructure," the group said in a Wednesday statement. "Properly done, a major investment in infrastructure today is an investment in the future, and like a new home, should be paid for over time - say 30 years -- by the users who benefit from the investment."

Business Roundtable was one of the first organizations to hit at changes in the corporate tax rate related to the plan and said on Tuesday evening that lawmakers "should avoid creating new barriers to job creation and economic growth, particularly during the recovery."

Republican lawmakers are also averse to changes in the tax structure. Although the actual bill has yet to be released, Senate Minority Leader Mitch McConnell will likely not be a fan.

"Let's see what this infrastructure package looks like. If it's a Trojan horse for a massive tax increase, put me down as highly skeptical," the Kentucky Republican said.

The new infrastructure plan comes on the heels of a $1.9 trillion spending package that Democrats jammed through an evenly divided Senate using reconciliation, a strategy that bypasses the 60-vote threshold required to avoid a filibuster.

Sen. Joe Manchin, a centrist Democrat from West Virginia and a must-have vote for the package, has said that he opposes ditching the filibuster. Republicans are already reeling over the fact that the COVID-19 package was pushed through using the special budget procedure.

Sen. Chuck Grassley, who sits on the powerful Finance Committee , said that how the new spending package is paid for is of crucial importance and that the bill really needs to be bipartisan. The Iowa Republican also said that in terms of paying for the legislation, it shouldn't be solely funded through tax policy but also spending reductions in other parts of the budget.

"I think that we will see how seriously they take bipartisanship," he told Iowa reporters during a Wednesday morning phone call. "They sure didn't take it very seriously in regard to the [COVID-19 package]."

House Speaker Nancy Pelosi is likely going to have a tough time getting the bill passed. Three Democratic lawmakers announced on Tuesday that they will refuse to vote on any proposed changes to the tax code unless the full deduction for state and local taxes paid, which is known as the "SALT" deduction, is reinstated.

A $10,000 cap on the SALT deduction, which largely benefits high-income households, was placed by Republicans as part of the Tax Cuts and Jobs Act. The last time Democrats tried to overcome the limit was in 2019, when 16 Democratic lawmakers joined the GOP in voting against it.

Back then, Democrats held a sturdy 34-member majority, but after the 2020 election that number has dwindled to only eight, thus making Biden's massive new spending package an even tougher proposition to pass.

Biden will announce the $2 trillion spending plan on Wednesday afternoon during a visit to Pittsburgh, Pennsylvania. It is just the first element of a two-part spending strategy that might end up costing up to $4 trillion and completely revamping the country's tax code.
Zachary Halaschak is the Economics Reporter for the Washington Examiner