Public Affairs & Government Relations

A Closer Look at President Biden’s Infrastructure Proposal

Key Takeaways

  • Following the passage of The American Rescue Plan, President Biden announced his next major policy initiative on Wednesday, March 31, 2021– The American Jobs Plan: a roughly $2.5 trillion infrastructure proposal that includes significant increases in federal funding for surface transportation, climate, digital, and social infrastructure, domestic manufacturing, and research and development. The next major policy initiative that President Biden is expected to announce in a few weeks is The American Families Plan that will center on childcare, healthcare and education.
  • The American Jobs Plan, which is being referred to by the White House as “a once-in-generation investment in America,” would be paid for over a 15-year period through a series of permanent tax increases, including: increasing the corporate tax rate to 28 percent; increasing the rate on Global Intangible Low Tax Income (GILITI) to 21%; and enacting a new regime for minimum taxation on “book income” that corporations report to shareholders on financial statements in an effort to capture revenue.
  • The announcement is a major milestone on a long and complex journey that will involve many different agency officials and congressional leaders and consist of several pieces of legislation, a series of congressional hearings and markups, at least one vote-a-rama, and possibly the convergence of many different bills in a massive budget reconciliation package. House Speaker Nancy Pelosi wants to pass an infrastructure bill by July 4, giving lawmakers just six weeks of legislative session, whereas the Senate won’t likely consider legislation until the middle of July at the earliest.

Analysis of The American Jobs Plan

The proposal can be organized into four key pillars: surface transportation (e.g., highways, bridges, ports, airports, transit systems); climate, digital, and social infrastructure (e.g., pipes, electric grid, broadband, homes, schools, caregiving etc.); domestic manufacturing (e.g., clean manufacturing, workforce development, etc.); and research and development (e.g., climate research, utility-scale energy storage, carbon capture storage, advanced nuclear, electric vehicles, etc.).

  • Surface transportation: Create a more resilient transportation system built by Americans with sustainable and innovative materials. Specifically, the proposal highlights:
    • Roads and Bridges: $115 billion to modernize 20,000 miles of roads, bridges, and highways.
    • Ports, Waterways, and Airports: $25 billion to update airports and $17 billion to improve waterways infrastructure.
    • Rail: $80 billion to address Amtrak’s repair backlog; improve and expand corridors; and improve freight rail safety, efficiency, and electrification.
    • Public Transit: $85 billion to modernize and expand public transit.
    • Electrifying Vehicles: $174 billion to retool the EV supply chain and accelerate the production and adoption of EVs domestically.
  • Climate, digital, and social infrastructure: Narrow social and economic disparities by delivering water, broadband, and electricity to all Americans. Specifically, the proposal highlights:
    • Broadband: $100 billion to deliver high-speed broadband to every American.
    • Power Grid: $100 billion to update the electric transmission system, invest in clean energy, and remediate idle energy and industrial sites.
    • Drinking Water: $111 billion to improve water infrastructure and replace lead service lines.
    • Affordable Housing: $213 billion to produce, preserve, and retrofit two million affordable housing options.
  • Domestic manufacturing: Revitalize the U.S. manufacturing base to create jobs lost in the pandemic, secure access to critical goods, and jumpstart clean energy manufacturing.
    • Critical Goods: $50 billion to help produce semiconductors domestically.
    • Jobs: $30 billion over 4 years to replace U.S. job losses caused by the pandemic through investments in medical countermeasures manufacturing, research and development, and related biopreparedness and biosecurity.
    • Clean Energy Manufacturing: $46 billion investment in federal buying power for clean energy.
    • Capital for Domestic Manufacturers: $52 billion to provide domestic manufacturers with access to capital.
  • Research and Development: Advance U.S. leadership in the development and deployment of critical technologies that help combat climate change.
    • Climate: $35 billion for R&D in clean energy technology and jobs.
    • Critical Technologies: $120 billion to accelerate investment in innovation and jobs within critical technologies industries.
    • Racial & Gender Inequity: $35 billion to support women and people of color pursuing educations and careers in innovation-focused industries.

Proposed Tax Changes

President Biden’s infrastructure proposal partially offsets the costs of the plan with tax increases on corporations, particularly those with operations in multiple foreign jurisdictions. Specifically, the administration has proposed:

  • Increasing the corporate tax rate from 21% to 28%;
  • Increasing the rate on Global Intangible Low Tax Income (GILITI) to 21%; and
  • Enacting a new regime for minimum taxation on “book income” that corporations report to shareholders on financial statements in an effort to capture revenue.

Such changes are likely to have a significant impact on a broad range of industries, as book income accounting methods and taxable income reported to the IRS are governed by different sets of rules and standards. For example, companies with deferred tax liability such as depreciation expense could be adversely impacted.

The Administration’s tax proposals are drawing skepticism on Capitol Hill, as Republican leaders have already stated they will not support any tax increases. A number of Congressional Democrats are also wary of raising the corporate rate to 28%. The Biden Administration is likely laying down a marker for negotiations as the year progresses.

Next Steps

The topic of infrastructure will dominate the political conversation in Washington for months to come. Since unveiling the infrastructure proposal, the Biden Administration has been hard at work rallying support from the business, labor and environmental communities. While groups such as The Business Roundtable and U.S. Chamber of Commerce have praised parts of the proposal, they have also rejected the idea of tax increases. The Biden Administration has expressed willingness to work across the aisle on bipartisan solutions, although many Republicans believe several aspects of the proposal are non-starters.

When Congress returns from its two-week recess on Tuesday, April 13th, we expect a flurry of legislative activity on infrastructure – starting in the House of Representatives. Already, multiple committees of jurisdiction have introduced standalone bills that closely align with President Biden’s proposal and could be included in a larger infrastructure package (e.g., the Water Quality Protection and Job Creation Act of 2021, the CLEAN Future Act, and the LIFT America Act). House Transportation and Infrastructure Committee Chairman Peter DeFazio will soon introduce his version of an infrastructure proposal – likely similar to H.R. 2, Moving Forward Act – and seek to markup by the end of May. The Senate Environment and Public Works Committee could also introduce its version of legislation in the coming weeks, with other committees of jurisdiction such as the Senate Banking Committee and Senate Commerce Committee following suit.

It’s safe the say that the politics and process will be complex and difficult to navigate. If the Biden Administration and Democratic leaders pursue one massive bill as opposed to a piecemeal approach, they will likely use budget reconciliation, which requires only a simple majority vote in the Senate. However, even with budget reconciliation, there is little-to-no room for defection by Democratic lawmakers. Already, some moderate Democrats such as Representatives Bill Pascrell, Josh Gottheimer, Mikie Sherrill, and Tom Suozzi are saying they will not vote for tax changes unless Congress repeals caps on deductions for state and local taxes (SALT). An alternative path that President Biden and Democratic leaders could take is a piecemeal approach that includes breaking up the surface transportation portion of a broader infrastructure proposal and seeking to pass it with bipartisan support, while reserving budget reconciliation for other portions of the proposal that are likely nonstarters for Republicans.

Related Articles

January 14, 2022

FTI Consulting News Bytes – 14th January 2022

Welcome to FTI Consulting News Bytes – a roundup of top tech stories of the week from FTI Consulting’s TMT (Telecom,...

January 13, 2022

FTI Consulting Public Affairs Snapshot: To CBDC or not to CBDC?

The Mesopotamian shekel is often cited as the first form of money, initially representing a specific weight of barley, a...

January 13, 2022

ESG+ Newsletter – 13th January 2022

Your weekly updates on ESG and more Greetings from 2022! Our first ESG+ Newsletter of the year starts off with a review ...