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Public Policy Newsletter Article

Biden’s Infrastructure Plan Increases Corporate Tax Rate

  • 2021-04-22T15:00:00.000+0000
  • Author: Laure Fabrega

At the end of March, President Joe Biden released his $2.25 trillion infrastructure and tax plan, referred to as the American Jobs Plan. A second spending plan focused on health and families is expected to be released as well. House and Senate committees of jurisdiction will draft and vote on legislation in the coming weeks. It has not been decided yet whether the proposal will move as one package through the reconciliation process or be broken down in several bills.

The plan includes $620 billion for transportation, $400 billion for elder and disability care, $300 billion for American manufacturing, $213 billion for housing, $180 billion for research and development (R&D), $112 billion for schools, $111 billion for water, and $100 billion for broadband, among others. Of specific relevance to the life science industry, the bill includes $30 billion for investment in pharmaceutical R&D, biosecurity and biopreparedness, and $50 billion to create a technology directorate focused on semiconductors, biotechnology, and advanced technologies.

The massive expenditures would be paid for with tax increases, including raising the corporate tax rate to 28 percent. Biocom California had been a strong supporter of lowering the corporate tax rate to 21 percent in the 2017 tax reform. The provision faces strong opposition from Republicans, claiming the new average combined state and federal rate of 32.34 percent would be the highest among the G-7 countries and severely hurt American companies. The bill would also increase from 13 percent to 21 percent the minimum tax on profits U.S. companies earn abroad and impose a 15 percent minimum tax on income reported to shareholders by large corporations.

If all Republicans oppose the measure, Democrats will have a very small margin to pass the bill. While progressives are calling for an even bigger measure, other Democrats are threatening to vote against the bill if it does not repeal the $10,000 cap on state and local tax deductions enacted in the 2017 tax law. The provision disproportionally harm constituents in high-paying states, like California.