Biden's Infrastructure Bill is Actually Mad Cheap
... and don't let corporations tell you otherwise when their taxes account for just 1% of the economy
Publisher’s Riff
Infrastructure is one of those really critical items that most people don’t think about until a bridge collapses or a dam breaks. Since America is land of the unprepared, infrastructure is a key element we routinely neglect. It’s the last thing we think about until it’s dangerously obvious it’s in a state of complete disrepair or its completely failed on us. Case in point: Texas. There were years of warnings that Texas might experience the type of catastrophic weather it experienced in February. But, instead of making the necessary investments to weatherize key energy infrastructure, Texas is paying a whole lot more - in both money and human lives - responding to a disaster that was rather avoidable.
The warnings on America’s infrastructure are piling up. The most recent report card from the American Society of Civil Engineers gives national infrastructure a “C-” … so, we’re about a step away from a grade of “D.” That’s the richest and most powerful nation on the planet with a C- grade …
Globally, it’s not even in the Top 10 of best national infrastructure, according to the World Economic Forum’s pre-pandemic rankings …
… bringing it down to 13th overall on the global infrastructure rankings. While it’s not at the bottom, it’s not where the world’s largest economy should be …
Catching Up
President Biden’s latest bold proposal purports to change all that by catching up with a $2 trillion infrastructure and jobs investment package. This includes …
$621 billion for transportation
$650 billion for “quality of life” infrastructure (homes, school buildings, water pipes, broadband, etc.)
$400 billion for the elderly and disabled
$300 billion for research & development, as well as manufacturing
This is actually $4 trillion less than what the ASCE recommends is needed to meet all current infrastructure demands: which is $6 trillion. So, first, Biden’s proposal is just 33 percent of what the nation’s premier infrastructure experts recommend …
How Do We Pay For It?
To pay for this plan, the federal government will need to generate revenue. As important as infrastructure is, $2 trillion is a lot of money that the government does not have at the moment, especially as it has spent way more than it has generated in revenue during an economically debilitating pandemic. Hence, Biden suggests putting his predecessor’s infamous 2017 tax cuts into reverse: raising corporate taxes from the current 21 percent to now 28 percent. That would offer the federal government an immediate injection of cash to pay for infrastructure.
Corporations have, predictably, balked at this plan, given that they’re enjoying enormous benefits from not having to pay the federal government so much. Republicans, of course, are lining up alongside the corporations because, well, Republicans are tyrannical (and comfortably racist) misers. Democrats, including Biden, counter with “everybody needs to pay their fair share” in their usual form of moral grandstanding as if Republicans and corporate executives - answering to profit-driven shareholders - really care about the moral arguments. They don’t.
In the meantime, the corporate lobby, in conjunction with Republicans, will strive to convince everyone that this particular infrastructure bill is too expensive. Democrats need to stop countering with the “fair share” argument and saddle up with a pure numbers and cents argument: 1) this bill is actually cheaper than the full amount we need to fix all of America’s infrastructure and 2) corporations actually make way more money from fixed infrastructure than they keep claiming they’ll lose.
Corporations Barely Pay Taxes As Is
Corporations will endeavor to fool you that they’re already paying too much in taxes now. There will be people (mostly White Republican voters) who will be moved by that argument and a coming-soon-to-a-theater-near-you rationalization that raising these taxes any further will become a drain on the economy. Keep in mind that the current corporate tax rate of 21 percent is actually, according to the non-partisan Tax Policy Center, down from where it was at 35 percent just several years ago: a 14 percent drop, and …
The United States imposes a tax on the profits of US resident corporations at a rate of 21 percent (reduced from 35 percent by the 2017 Tax Cuts and Jobs Act). The corporate income tax raised $230.2 billion in fiscal 2019, accounting for 6.6 percent of total federal revenue, down from 9 percent in 2017.
That amount of $230.2 billion is also just 1 percent of the total U.S. economy (which is $22 trillion). Corporations have actually had it pretty good for a while now in terms of tax rates. It’s difficult to stomach the argument that they’re being overly taxed, even when Biden’s proposed 28 percent is still far below where they were before the tax cuts of 2017 …
In the meantime, individual U.S. residents who make $40,000 or more (filing either single or jointly) pay more in tax rates …
Corporate profits in the 4th Quarter of 2020 - even at the end of a full-blown pandemic year - were about $1.95 trillion. The $230 billion in taxes that corporations paid are just 11.7 percent of a quarter’s corporate profits … OR just 11.5 percent of the proposed $2 billion infrastructure bill.
Cost-Benefit Analysis
When considering the raw numbers, the “fair share” argument is weak. President Biden and Democrats will need to pose it this way to the business community and general American public: “Infrastructure is what you use to make money and to prosper as a business. Without it, business prospers less. Exactly, how do you propose shipping goods and services if you don’t have any infrastructure to do it? By carrier pigeon?”
Either businesses help by contributing $2 trillion now (which is 33 percent less than what’s recommended anyway) OR take a $7 trillion hit (estimated business losses) to the bottom line by 2025 (that’s a loss of $1.75 trillion in business sales per year) OR even $23.3 trillion in lost business sales by 2040 (and this doesn’t even count the cost of unforeseen disasters). Contributing $2 trillion now sounds like a pretty good - and really cheap - deal.