Joe Biden just announced a $2 trillion spending plan in the US – but there’s a catch
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President Joe Biden has revealed his huge infrastructure and economic recovery plan in the United States. The proposal looks to improve transportation infrastructure, water systems, broadband and manufacturing. These elements are designed to rebuild the nation. But the plan will require changes to current financial rules and tax hikes to fund these plans.
President Joe Biden unveiled his $2tn plan to rebuild the nation’s ageing infrastructure and push the country towards a clean energy economy on Wednesday.
The American Jobs Plan, as it has been named, was formally introduced on March 31 by President Biden.
Speaking at a union training centre in Pittsburgh, Pennsylvania, Mr Biden said: “It’s time to build our economy from the bottom up and the middle out.
“Wall Street didn’t build this country; you, the middle class, built this country. And unions built the middle class.”
The Americans Jobs Plan is Mr Biden’s second major policy proposal of his young presidency, after he won approval for his $1.9 trillion COVID-19 relief bill last month.
The money will also be used to support electric vehicles, clean energy and boost access to caregivers and their pay.
In total, more than $621bn will be spent on upgrading roads, bridges, rail, Amtrak and electric vehicles.
The proposal, called the American Jobs Plan, would overhaul how Americans get from Point A to Point B.
The plan includes big infrastructure fixes which both major parties, as well as a majority of Americans, consistently say they want.
Mr Biden’s proposal would also pump billions into the United States’ strategy for tackling climate change, and effectively take on China’s capacity in the manufacturing sector.
The proposal includes:
- $115 billion (£83.4bn) to repair and rebuild bridges, highways and roads;
- $100 billion (£72.5bn) to expand high-speed broadband across the entire country;
- $100 billion to upgrade and build new schools;
- $100 billion to expand and improve power lines and spur a shift to clean energy.
- $300 billion to bolster manufacturing
- $380 billion for infrastructure research and development
- £213 billion for affordable housing
- £400 billion for home and community-based health and elderly care.
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But all of these proposals come at a cost.
The eight-year spending plan will be funded by raising Corporate Tax.
President Biden has proposed increasing the Corporate Tax rate to 28 percent, which would reset it to the level it was at before former president Donald Trump implemented tax cuts in 2017.
Mr Trump’s decision saw the minimum tax on firms drop to 21 percent.
Although this change seems dramatic, it is actually lower than the rate it was at before Mr Trump’s tax law came into force (35 percent).
Mr Biden’s plans do not make any mention of raising other forms of taxation such as individual tax rates.
The bulk of the proposal would be funded by ongoing increases over the coming eight years from the rise in Corporate Tax.
Mr Biden’s proposal would also close a number of loopholes which prevent corporations from stashing money in offshore banks to evade higher rates of taxation.
He plans to impose higher taxes on multinational companies, with the minimum rate rising to 21 percent.
The plan would eliminate a rule that allows US companies to pay no taxes on the first 10 percent of returns when they locate investments in other countries.
The White House added the increased revenue would pay for all of the projects over a timespan nearly twice as long: 15 years.
President Biden claims the plan would reduce deficits over the subsequent years.
A President Biden spokesperson said: “Part of the economic logic of this plan is that this is not just about infrastructure, but it’s about creating more jobs and more industrial strength in the United States.
“When you make these infrastructure investments and couple it with the president’s commitment to buy American, you’re pulling forward and creating demand that will help accelerate new industries in the US.”
Response to Mr Biden’s plans has been mixed, rousing fierce opposition from Republicans and business leaders, while Democrats have said the changes are much-needed.
Senate Minority Leader Mitch McConnell is slamming President Biden’s infrastructure plan as a “Trojan horse” that conceals huge tax hikes that could hit both companies and the upper-middle class.
Many Republicans have called the rises “a recipe for stagnation and decline”.
The Business Roundtable and Chamber of Commerce said they supported investments but would oppose tax increases.
A large-scale infrastructure plan has been talked about by both parties for years but never executed.
Mr Biden is facing a tough battle, with not one single Republican voting for his first Covid bill, known as the American Rescue Plan.
Given the likely resistance from the Republican Party, Democrats could seek passage of the infrastructure legislation in the Senate through budget reconciliation – where only a simple majority is required.
The White House has not given any insight into how it plans to progress the plan through Congress.
However, President Biden said: “We’ll have a good-faith negotiation with any Republican who wants to get this done. But we have to get it done.”
Public support shows more support for the raising of corporate taxes to support infrastructure, with a Morning Consult/Politico poll this week finding 54 percent of respondents support the plans, with 27 percent opposed to the idea.
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