The infrastructure investment included in the Biden Infrastructure Plan would be funded through a variety of broad tax increases, primarily aimed at multinational corporations, but that would also impact domestic C-corporations, including some construction firms. Increased taxes on pass-through businesses, individual tax rates, estate taxes, capital gains taxes, and payroll taxes, are expected in the next “human infrastructure” package to be released in the near future. The primary funding mechanism would be to increase the corporate tax rate from the current 21% rate to 28%.
This is in line with President Biden’s campaign tax plan, as well as a proposal from the Treasury Department under the Obama administration. Additionally, the proposal would significantly tighten a number of international tax enforcement provisions created as part of the 2017 Trump tax cuts law (the Tax Cuts and Jobs Act), such as taxes on Global Intangible Low-Taxed Income (GILTI), and a significantly expanded budget for tax enforcement through the Internal Revenue Service (IRS).
While user-fee based systems can provide long-term infrastructure investment sustainability, many of the spending provisions contained in the Biden Infrastructure Plan go much further than traditional “infrastructure” spending. While it would be appropriate for some of this spending to be funded through general revenue, it is unclear what the reaction from broader business community will be to these proposed tax increases. The Tax Cuts and Jobs Act reduced the corporate tax rate from 35 percent to 21 percent, but the reduction in rates was largely “paid for” by eliminating tax preferences applicable to all businesses. Indeed, the proposed increase in the corporate tax rate will impact many construction firms, likely resulting in a higher effective tax rate than they paid prior to 2017.
Additional tax provisions mentioned (but not specified in detail) in the Biden Infrastructure Plan are tax incentives for affordable housing, financing school construction, and domestic manufacturing. We expect that further detail on these incentives will be revealed as further information about the plan is released.