Business leaders push for infrastructure deal, minus corporate tax hikes
WASHINGTON – In private discussions with dozens of business leaders, officials in the Biden administration present the president’s $ 2.3 trillion infrastructure proposal as an investment they will benefit from, with a focus on the support for new vocational training programs as well as better roads, according to officials and leaders.
Some suggested alternative ways to finance infrastructure projects, while others did not offer details. Several executives and business groups have said they are eager for Mr Biden to live up to his pledge to seek compromise with Republican lawmakers – some of whom have proposed a smaller infrastructure package funded by gasoline taxes and other user fees, not corporate tax increases. Several Senate Republicans are meeting with Mr. Biden at the White House on Thursday to explore a possible deal.
“I don’t know what the political goal is here,” David Ricks, managing director of Eli Lilly & Co., said in an interview. “The industry drives a huge amount of private capital and infrastructure spending. Taxing this seems like a bad idea when we are trying to get the economy going. A spokesperson said the company is waiting to see more details on the plan before commenting further on how it should be paid.
Following the 2017 corporate tax cuts, Indianapolis-based Lilly increased its capital spending in the United States, including building a new drug plant in North Carolina. Lilly said it was the company’s first new US plant since 2006, when it built facilities in Puerto Rico and Indiana. “Now we have to reconsider all of these things if they increase rates,” Mr. Ricks said.
The question was a common topic on income calls in recent weeks.
“If we were to raise rates to even 25% and include state taxes, we would become the highest rated developed country in the world in terms of tax rates,” said Joseph Wolk, CFO of Johnson & Johnson..
SL Green Realty Corp.
CEO Marc Holliday said, “Nobody wants a tax increase. I mean, for sure.
Some executives and business groups have proposed financing alternatives, including user fees for new infrastructure, such as tolls, and the creation of a federal infrastructure bank to boost projects through loans. The Business Roundtable, a professional group of business executives, said that if necessary, the government should borrow more, arguing that every dollar invested generates more economic growth.
Mr Biden, whose overall spending proposals already reach $ 6 trillion, has resisted more debt in private conversations with lawmakers. He has been to the states to present his proposals, including for an aging water plant in New Orleans, and has additional meetings with lawmakers this week.
“I was encouraged. Nobody likes to talk about compensation, but there is room for compromise, ”said Commerce Secretary Gina Raimondo, who spoke to more than 50 executives, including those of Alphabet. Inc. of
Google, AT&T Inc.,
Dell Technologies Inc.,
Ford engine Co.
, Intel Corp.
and Medtronic PLC.
The administration’s outreach is designed to attract powerful allies who have traditionally favored Republican tax policy or at least counter that opposition by highlighting the benefits of the broad package. The White House also feels it has politics on its side, with polls showing broad support for infrastructure spending and increasing corporate taxes.
“They know what it means to them,” said Ms. Raimondo, who spoke with leaders about China’s massive investment in infrastructure and technology and the need to stay competitive.
Some tech companies have rallied around Biden’s proposal to allocate tens of billions of dollars for research and development and to boost domestic semiconductor production, but are pushing back restrictions on the use of international tax havens by companies. companies. Telecommunications companies have welcomed some proposals to expand broadband Internet access. The auto industry has said it supports tax credits to boost the adoption of electric vehicles. Manufacturers have said they appreciate arrangements to improve supply chains, according to more than a dozen executives and statements from trade associations.
And some executives have said their companies can tolerate a tax rate higher than the current 21%, but not necessarily the 28% sought by Mr Biden. They include the president of Lyft Inc., John Zimmer and Amazon.com Inc. of
Jeff Bezos, whose company has drawn criticism over taxes.
AT&T CFO Pascal Desroches said the telecommunications giant is urging lawmakers to keep the corporate tax rate low to make the United States more competitive internationally. “It’s important that the right incentives are in place,” he said. “But at the end of the day, if we’re forced to operate in an environment where tax rates are higher, we’ll navigate it like everyone else.”
Several Capitol Hill business leaders and associates say they expect the tax rate hike to reach 25%. Last month, Mr Biden discussed a lesser rate hike with a bipartisan group of lawmakers, and he has since said he was open to negotiation.
Jonathan Gray, chairman of investment firm Blackstone Group Inc., said the impact of the corporate tax changes will depend on the scope of the Biden administration. “If we are talking about corporate rates that range from 21 to 25 [percent] I’m not sure it makes that much of a big difference, ”he said at a Wall Street Journal event last week. “I guess it will probably be something below the original proposals and a strong economy will get us through it.”
The current tax rate was set under the 2017 tax law. Biden’s team, including National Economic Council director Brian Deese, reminded leaders that the proposed new rate is still below the 35 % that existed before this legislation signed by former President Donald Trump.
Business leaders are now looking to Republican allies in Congress. Last month, a group of senators released the outlines of a $ 568 billion infrastructure plan that calls for collecting user fees for electric vehicles and reallocating existing federal spending, while at the same time opposing corporate tax increases.
Republicans characterized it as a starting point for negotiations – Democrats generally view the proposal as too modest – and the White House has said it welcomes the discussion. Business groups too.
“For anyone sincerely interested in seeing a bold and responsible infrastructure plan finally enacted into law, there is only one way forward: bipartisan negotiations,” said Neil Bradley, executive vice president of the House. of American trade.
SHARE YOUR THOUGHTS
What impact could the Biden administration’s infrastructure plan have on businesses in your area? Join the conversation below.
If Mr. Biden can’t convince Republicans, Democrats will likely attempt to use a budget process called reconciliation. This avoids the Senate’s 60-vote threshold to move most bills forward, but could limit the content of the plan.
Former House Republican Majority Leader Eric Cantor, now vice chairman of investment bank Moelis & Co., said he did not expect bipartisan support if the plan included increases taxes. Republicans have made fun of the size and scope of Mr. Biden’s plan and are firmly opposed to raising corporate taxes.
“When there’s a signal that taxes are going to go up, so you’re going to have a lower return on investment and you’re going to have less investment,” said Cantor, who now advises corporate clients on issues such as public policies. . “Coming out of a pandemic is not what we should be looking for in America.”
Mr Biden said his only restriction on paying for the package was raising taxes for those earning less than $ 400,000, but he said he expected American companies to do their part.
Cedric Richmond, director of public engagement at the White House, has also been in contact with a number of companies, including JPMorgan Chase & Co. and Duke Energy. Corp.
, to advocate for an increase in corporate income tax.
“All we are saying is that these investments will benefit the competitiveness of businesses and help us win the future,” he said. “We believe companies should share this investment.”
—Peter Loftus and Drew FitzGerald contributed to this article.
Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8