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In a speech in Pittsburgh yesterday, President Biden rolled out his American Jobs Plan and laid out his arguments for the plan, which is essentially $2 trillion in infrastructure investment over eight years extending to the power grid, electric vehicles, and broadband, paid for with proposals like increasing the corporate rate to 28% and changing the international provisions of the TCJA. The President then provided the inspirational context, saying the plan calls for "investing in American-based companies and American workers" to fix roads that businesses rely upon, providing safe drinking water and access to the Internet, and making the US competitive in markets like battery technology, biotechnology, computer chips, and clean energy.

The President said the plan isn't one that "tinkers around the edges," and compared its magnitude to the space race and construction of the interstate highway system. He defended the tax increases proposed to pay for it, saying the corporate rate should have been lowered to 28% in the first place and criticizing offshoring and some companies paying no tax, but also said he is "open to other ideas so long as they do not impose any tax increase on people making less than $400,000." The President suggested the corporate rate increase would raise $1 trillion and leveling "the international playing field" including with global intangible low-taxed income (GILTI) changes would also raise $1 trillion, both over an unusual budget window of 15 years (rather than the normal 10 years). The American Families Plan, which the President said he will talk about "in a few weeks," is expected to be paired with tax increases targeting individuals. Biden said yesterday the benefits of the TCJA "went to the wealthiest Americans."

The fact sheet released by the White House included a long list of tax increases and why they are necessary, but not the details to understand exactly how they will work. Those details will likely come in the President's FY2022 budget, possibly in May, though some members of Congress aligned with the White House are working on proposals consistent with the plan. Senate Finance Committee Chairman Ron Wyden's (D-OR) framework on corporate and international tax reform teed up by the March 25 Committee hearing is expected to be released next week. Politico reported Wyden as saying his plan would be "distinct" from the President's proposals but share the same goals. The Biden plan also has a nod to the OECD BEPS 2.0 project, calling for other countries to adopt strong minimum taxes. The Wall Street Journal (WSJ) editorial board noted, "even the OECD has been discussing a global minimum tax of about 12%, while Mr. Biden wants 21%."

A separate WSJ story on business tax aspects of the plan said of GILTI: "The 2017 law created a minimum tax on foreign profits of U.S. companies … Mr. Biden would also require companies to calculate that tax on a country-by-country basis. And it would change a provision that lets companies exclude 10% of their tangible foreign assets from the calculation of the base of the minimum tax. That provision, Democrats argue, provides an incentive to put factories abroad, but there is little evidence that companies have actually made decisions based on that provision."

It also said: "The plan would alter or repeal the Base Erosion and Anti-Abuse Tax created in 2017. That tax was designed to prevent foreign companies from loading up their U.S. operations with deductions and pushing profits to their low-tax headquarters countries. The Biden plan would change that tax so that companies are limited from shifting income to a country that lacks a minimum tax. That mirrors an emerging — but still unsettled — international agreement."

Punchbowl reported March 31 that, "during a call with top committee staff and leadership, someone asked when the tax increases would go into effect, and the administration said they would work with Capitol Hill on that."

On the budgetary mechanics of the plan, the Washington Post reported: "A key debate is likely to be the price tag of the package. Federal budgets typically look at costs and revenue over a decade. By that metric, Biden's plan would require significant borrowing. Supporters of Biden's plan argue that it makes sense to pay off these big investments over time, much the way people borrow up front and pay off their mortgage over many years. They also point out that if the corporate taxes remain in place, the plan would actually be a revenue generator after 2036."

Reaction — President Biden said he would invite the input of Republicans, who aren't likely to support rolling back portions of their signature tax law, the TCJA, or the beyond-traditional infrastructure provisions. Senate Republican leader Mitch McConnell (R-KY) called the plan a "Trojan horse" for tax increases, and House Republican Whip Steve Scalise (R-LA) tweeted the plan is "the Green New Deal under a new name."

It was widely observed that it will be some difficult months of trying to move the plan through Congress to meet the July 4 target set by House Speaker Nancy Pelosi (D-CA). Government funding and highway authorization both expire September 30. Without Republicans, Democrats may turn to budget reconciliation, and though there is difficulty fitting infrastructure within its rules, Senate Majority Leader Chuck Schumer (D-NY) is exploring using the process and potentially getting a second set of reconciliation bills from each budget resolution. There are differences among Democrats, with progressives wanting a larger bill but saying infrastructure needn't be paid for, and NY/NJ members insisting the $10,000 TCJA state and local tax (SALT) deduction cap be repealed. "It's something that I think is very important, and I'm going to fight to make sure it gets done," Schumer said yesterday of the SALT cap repeal.

Congressional Progressive Caucus Chair Rep. Pramila Jayapal (D-WA), who previously said she doesn't think infrastructure needs to be paid for but she does want tax changes, was reported in the New York Times as suggesting the plan could be bigger, saying it's "imperative that we act on a once-in-a-generation opportunity to use our governing majorities," including on climate change. "We have a limited window to get this done," she said.

A WSJ editorial said: "The tax increases are so extreme that they seem intended to give Democrats like Joe Manchin and Kyrsten Sinema room to demand changes and then claim victory before voting for increases that would still be enormous. Note that the White House increased the magnitude of the increases at the insistence of the Congressional left … "

The President is set to convene his first cabinet meeting this morning, with the infrastructure plan said to be a focus. Punchbowl reported that President Biden is considering an address to Congress around the 100-day mark of his presidency, April 30.

Friday, April 2 (12:00 p.m.), is the EY Webcast, "Tax in the time of COVID-19: Update on legislative, economic, regulatory and IRS developments." COVID-19 and the resulting economic crisis have made reacting to tax developments more complicated than ever. Join us for the next webcast in our series as we discuss how businesses can navigate the tax policy environment and continue to effectively operate their tax function in this time of crisis and change. Panelists will provide updates on: (i) the US economy and tax policy; (ii) breaking developments; and (iii) what's happening at the IRS. Register.

What to Expect in Washington won't be published the week of April 5, but Tax Alerts will be released as events warrant.

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