- The new infrastructure bill could cost more and have greater tax hikes than originally anticipated.
- The Washington Post reported it could total $US4 ($5) trillion, with up to $US3 ($4).5 ($5) trillion in tax hikes.
- Democrats have suggested various tax hikes, while Republicans have opposed all them.
- See more stories on Insider’s business page.
President Joe Biden is expected to unveil his massive infrastructure plan on Wednesday, but it could surprise on the upside.
While the plan was initially thought to have a $US3 ($4) trillion price tag, it could now cost as much as $US4 ($5) trillion and include $US3 ($4).5 ($5) trillion in tax hikes, according to The Washington Post.
Last week, The New York Times first reported details of the upcoming infrastructure proposal. In that report, sources familiar with the plan said it could cost up to $US3 ($4) trillion. The plan was confirmed to Insider. According to documents obtained by The Times, the package will be split into two legislative pieces: one focused on rebuilding infrastructure such as roads and bridges and another focused on the care economy, with funding for things including universal pre-K and free community college.
But on Monday, three sources familiar with the matter told The Washington Post that the White House was expected to push for as much as $US4 ($5) trillion in spending on infrastructure and as much as $US3 ($4).5 ($5) trillion in tax hikes.
The sources said administration officials worried the large gap between spending and revenue would widen the deficit so much that it could trigger a spike in interest rates and increasing taxes would help mitigate that.
On Wednesday, Biden is expected to unveil the first legislative piece of the infrastructure plan, which would focus on rebuilding roads and bridges, expand clean-energy investments, and create infrastructure for electric vehicles. This part of the plan would also include funding for care for older people and those with disabilities.
As for the second part of the plan focused on the care economy, White House press secretary Jen Psaki said on Fox News Sunday that it would be released “in just a couple of weeks” and “address a lot of issues that American people are struggling with.”
“The total package we’re still working out, but he’s going to introduce some ways to pay for that, and he’s eager to hear ideas from both parties as well,” Psaki said.
Biden has already shown a historic willingness to go big with recovery packages, in contrast to the stimulus packages enacted during the Obama-era recovery in the wake of the Great Recession.
Tax hikes may be on their way – and Republicans don’t like that
The Washington Post wrote the focus on the deficit could help appease critics who worry about spending – but it also lays out a big challenge for Biden. The White House would need to get Congress on its side to enact tax increases, which “together would represent the largest tax hike in generations,” The Post said.
Lawmakers have already begun floating a host of ideas to fund the infrastructure package, with tax hikes on the table. Moderate Democratic Sen. Joe Manchin of West Virginia told Axios earlier this month that an infrastructure bill could be as large as $US4 ($5) trillion if it was funded by tax hikes. But he made it clear that he would not support using reconciliation to pass it. That process was used to pass $US1.9 ($2) trillion stimulus package.
He said during his campaign that he would increase the corporate tax from 21% to 28% – still lower than its 35% rate before President Donald Trump’s tax cuts. He’s also been looking at adjustments to the stepped-up basis, as well as expansion of the capital-gains tax, Bloomberg reported. He may also raise the top income-tax rate to as high as 39% for Americans making over $US400,000 ($522,675) a year.
But Republican lawmakers are unlikely to support tax hikes to fund infrastructure measures. In fact, some have been pushing for the opposite of Sen. Bernie Sanders’ proposed increase to an estate tax, instead calling for it to be repealed.
“I don’t think there’s going to be any enthusiasm on our side for a tax increase,” Senate Minority Leader Mitch McConnell told reporters last week.