Biden Wants Corporations To Pay For His $2 Trillion Infrastructure Plans

Biden wants corporations to pay for his $2 trillion infrastructure plans, echoing a history of calls for companies to chip in when times are tough.

 

Biden is asking companies to cover the tab for his infrastructure plan.

President Joe Biden just proposed a roughly US$2 trillion infrastructure plan, which he ambitiously compared to the interstate highway system and the space race. He aims to pay for it solely by taxing companies more, including the first increase in the corporate tax rate since the 1960s.

Biden said he wants to increase the rate from 21% to 28% – which would still be below the 35% level it was at before the 2017 tax cut – and strengthen the global minimum tax to discourage multinational corporations from using tax havens. Together, he estimates it would raise the necessary funds to finance his plan over 15 years.

“No one should be able to complain about” raising the rate to 28%, Biden said in a speech announcing the plan. “It’s still lower than what that rate was between World War II and 2017.”

As an expert on tax policy, I believe he’s got a point.

What’s more, I think the president’s plan appeals to the basic principle of tax fairness that the corporate income tax was founded on: The taxes a person or business pays should be commensurate with the benefits they receive from public spending. And companies receive quite a lot.

History of the corporate tax

Prior to the 20th century, the federal government funded itself primarily with tariffs and excise taxes on goods such as alcohol and tobacco.

The first corporate income tax was signed by President Abraham Lincoln in 1862 to help fund the Civil War and then phased out in the 1870s.

As the U.S. grew in the early 20th century, policymakers worried about the economic and trade risks of relying too heavily on high tariffs. So in 1909 they created the corporate income tax that we know today, almost as an afterthought, in a bill that was designed to reform tariffs.

Corporate taxes did not become a major part of the U.S. tax system until they were used to help finance World Wars I and II. Before 1916, the rate was just 1% but grew to 12% during WWI and ballooned to 40% during WWII. Congress also passed “excess profits” taxes of up to 95% to curb wartime profiteering in certain industries.

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Disclosure: This article is republished from The Conversation under a Creative Commons license.

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