Home > Uncategorized > This Just In: $2,000,000,000,000 Needed to Upgrade Infrastructure Will Require Higher Taxes! But… the Good News is the US Chamber Acknowledges the Need to Spend that Much and the Libertarian Reason blog asks “Higher Compared to What?”

This Just In: $2,000,000,000,000 Needed to Upgrade Infrastructure Will Require Higher Taxes! But… the Good News is the US Chamber Acknowledges the Need to Spend that Much and the Libertarian Reason blog asks “Higher Compared to What?”

Today’s NYTimes business section included a lengthy article by Jim Tankersley and Emily Cochrane describing the Biden administration’s plans to seek higher taxes to cover the cost of necessary infrastructure upgrades. The most compelling argument for these projects came from Ed Mortimer, the US Chamber of Commerce’s vice president of transportation and infrastructure, who stated for the record that : 

….the scope of Mr. Biden’s spending proposals appears to be “in line with what we need to do not just to fix our physical infrastructure, but to encourage innovation, to bring clean energy online. The numbers that are being bandied about, they’re high, no doubt about it, but they’re in line with the needs.”

Having the typically anti-government and anti-spending Chamber of Commerce supporting “the numbers being bandied about” by a nominally “liberal” President as “in line with the needs“is an indication that the business community is not in denial about the need for the government to fund these projects. And while the Chamber is distressed over the proposed increase in corporate taxes, it is willing to negotiate the details on spending!

“Raising corporate taxes, and others, is kind of a nonstarter for Republicans. It’s kind of a nonstarter for us, too,” said Ed Mortimer, the chamber’s vice president of transportation and infrastructure. But he said: “We believe the administration has opened the door for other ideas to be considered. It’s a legislative process. Whatever the president lays out is not going to be the final bill.”

Their stance can only be viewed as good news to the Biden administration. But from my perspective, Ira Stoll’s Reason blog post, “Here’s How Biden’s Proposed Tax Increase Will Affect You” has even better news. Why? Because the post acknowledges that the tax rates proposed by the Biden administration are not unprecedented. 

And while Biden’s tax plans add up to a hefty hit overall, some of the pieces themselves seem incremental.

He’d increase the top corporate rate to 28 percent. That’s more than the current 21 percent, but still less than the 35 percent that applied between 1993 and 2017.

He’d increase the top individual income tax rate to 39.6 percent. That’s up from the current 37 percent, but it’s a rate that applied from 1993 to 2000 and again from 2013 to 2017, so it’s not exactly unknown ground.

The two most extreme aspects of the Biden tax plan each have political pitches behind them that are at least plausible.The 12.4 percent payroll tax for Social Security’s Old-Age, Survivors, and Disability Insurance is capped for 2021 on a wage base of $142,800. Biden would apply the tax to income above $400,000. That, not the increase to 39.6 percent from 37 percent, would be the real hit to high-income earners in the Biden plan. The combined effect—39.6 percent plus 12.4 percent—would be that at the margin, the federal government would take 52 percent, or more than half, of dollars earned over $400,000. There’s an additional Medicare tax of 3.8 percent, which would take the top federal marginal tax rate up to 55.8 percent.

I often disagree with the pro-business libertarianism of Reason, but their articles ARE based on facts and, in this case, the facts are far different than the rhetoric coming from the GOP and are, from the perspective of an anti-government-spending media outlet, not outrageous. They are “incremental” and “plausible”. 

The tax hike for corporations, which will inevitably be characterized as a 33% increase by some media outlets and many GOP politicians, could just as easily be presented as 20% LOWER than that in place from the Clinton through the Obama administrations. As Reason writer Stoll notes, this is “not exactly unknown ground” .

The increase for top earners is a small increase, but it, too, reflects what was in place during the Clinton and Obama administrations and it applies only to those earning $518,000 for joint filers and over $311,000 for individuals… a very small proportion of taxpayers. But because the top 1% is constituted of 1.6 million households and because many CEOs get mind-boggling compensation, that small increase on the highest tax bracket will yield millions. Indeed, if that marginal increase is applied to the aggregate salaries of the top ten CEOs it would yield $19,240,000 toward the improvement of infrastructure. 

And as readers of this blog realize, I have no problem with the collection of social security payments for those who earn in excess of $400,000. It never seemed fair that I would get a pay raise in November because there was a cap on social security payments… but I never aspired to making millions of dollars. 

The bottom line is that there is a consensus on infrastructure but an unwillingness to restore tax cuts that have yielded no demonstrable improvement to the well-being of the general populous. The only way Biden could not get this bill passed is if voters somehow buy into the notion that a 2.6% increase on the wealthiest Americans and a restoration of businesses taxes to levels of the turn of the 21st century are detrimental to them. Rest assured that the GOP and their donors will be promoting that idea!  

 

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  1. Byron Knutsen
    April 1, 2021 at 6:02 pm

    I think we need to SEE a list of what is actually is being called Infrastructure and the amounts for each of the items before we get too excited and call it “all is good”. We do this too often when the party we like is in power.

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