America Inc is on the hook for Joe Biden’s splurge on infrastructure
UNLIKE HIS $1.9trn covid-19 relief bill, which was almost entirely deficit-financed, President Joe Biden would like his recently unveiled $2trn infrastructure plan to be paid for with taxes. Individual taxes have been left for later. Unluckily for American companies, the White House has set its sights on them to pony up.
This is hardly unexpected. Mr Biden had campaigned on a partial repeal of Donald Trump’s tax cuts, which slashed the statutory rate of corporate tax from 35% to 21%. The president would now like to split the difference, raising the rate to 28%. But this would yield only about $900bn of the $2trn total, according to fresh calculations by the Penn Wharton Budget Model.
A bigger chunk would come from American firms’ profits held overseas. The tax rate on global intangible low-taxed income (GILTI for short) would be doubled from 10.5% to 21%, and the tax would be assessed on a country-by-country basis rather than in aggregate. It would also eliminate the deduction for overseas income earned from American-based intangible assets like intellectual property. “There would be a strong tax magnet for that intellectual property and the associated jobs to migrate outside the US,” argues Rohit Kumar of PwC, a professional-services firm.
Together, the Penn Wharton model estimates, these changes would bring in...