The House passed the $1.85 trillion Build Back Better Act with a narrow vote of 220 to 213 on November 19, after Minority Leader Kevin McCarthy (R-CA) delayed its passage with an 8 1/2 hour marathon speech. The Congressional Budget Office (CBO) announced one day earlier that the bill would add $367 billion to the deficit by 2031. Moderate Democrats initially delayed the House vote on the $1.2 trillion bipartisan infrastructure bill, which was signed into law by President Joe Biden on November 15, until a cost estimate could show that the Build Back Better Act would not increase the deficit. Both bills combined would invest roughly $3 trillion to overhaul the nation’s roads and bridges, electric and water systems, and high-speed internet; as well as fund education, climate and social programs. Let’s break down what the two bills could mean for you.
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How Biden’s $3 Trillion Plan Could Become Law
House Democrats pushed the $1.85 trillion Build Back Better Act forward with a majority of seven votes after McCarthy had delayed it with a speech that lasted over eight hours. Now, the bill will move to the Senate, where all Democrats must rally together to pass the legislation through an evenly divided chamber. This will require Vice President Kamala Harris to cast a tie-breaking vote if Democratic Senators are unable to get Republican support.
The Build Back Better Act is the second part of Biden’s infrastructure and social spending legislation, which combined with the $1.2 trillion Infrastructure Investment and Jobs Act will invest roughly $3 trillion on upgrading and expanding the nation’s physical infrastructure systems, and fund social programs focused on education, healthcare and the environment.
Biden signed the $1.2 trillion Infrastructure Investment and Jobs Act into law, 10 days after the House passed the bill with a 228 to 206 vote. Six progressive Democrats voted against the bill and 13 Republicans crossed party lines to support it.
Progressives initially refused to vote for the infrastructure bill, which was already approved by the Senate on August 10, until Congress agreed to move the $1.85 trillion Build Back Better Act forward.
Moderate Democrats had also pushed back, asking for a nonpartisan cost estimate score on the $1.85 trillion Build Back Better Act. Though they ultimately pledged to support the social spending legislation as long as it doesn’t add to the deficit.
The CBO said on November 18 that the $1.85 trillion Build Back Better Act would increase the deficit by $367 billion from 2022 to 2031. It noted, however, that the cost estimate does not include additional revenue that could be generated from tax enforcement.
In a separate report, the CBO also estimated on the same day that increased tax enforcement could bring in $207 billion in revenue. Deducting that amount from the $367 billion deficit would reduce the CBO’s projection to only $160 billion over the next 10 years.
In either case, both cost estimates are at odds with the president’s pledge to pay for his infrastructure and social spending legislation entirely with tax increases on ultra high net worth individuals and corporations.
“The Build Back Better Act is fiscally responsible. It reduces the deficit over the long-term. It’s fully paid for by making sure that the wealthiest Americans and biggest corporations begin to pay their fair share in federal taxes,” he said in a statement on November 19.
While some Republican Senators supported the $1.2 trillion bipartisan infrastructure bill, they are expected to oppose the broader Build Back Better Act. That means Democrats would need to pass legislation through the budget reconciliation process, allowing them to get it approved with a simple majority of one vote. Still, the bill faces a tough road ahead, with moderate Democrats focused on reducing deficit spending.
On December 6, Senate Majority Leader Chuck Schumer (D-NY) wrote in a letter to the Senate Democratic Caucus that “our goal in the Senate is to pass the legislation before Christmas and get it to the president’s desk.” Schumer also updated that eight out of 12 committees have already “submitted their final Senate text to the Parliamentarian, the Congressional Budget Office and the Senate Republicans.” And remaining committees aim to finalize “over the course of this week and next.”
The legislative process to pass the $1.85 trillion Build Back Better Act into law could take weeks or longer. A representative must first sponsor the bill and then get it assigned to a committee for review before the legislation can get voted on, debated or amended. Changes made to the legislation must also get approved in both chambers of Congress before it can get signed into law. Biden will have 10 days to sign or veto the bill after bicameral approval.
What’s in the $1.85 Trillion Build Back Better Bill?
The new text approved by the House for the Build Back Better Act notably guarantees paid family leave and medical leave for all national workers, which will provide “up to four weeks of paid leave for parental bonding or to deal with their own or a loved one’s serious medical condition.”
The bill also takes steps to:
- lower the cost of prescription drugs by allowing Medicare to negotiate lower drug prices
- reduce out-of-pocket co‑pays
- establish a $35 out-of pocket maximum for insulin
- create a new $2,000 out-of-pocket limit for seniors’ expenses in Medicare Part D
The Build Back Better Act was originally slated to include $3.5 trillion in spending, but as part of a compromise to reduce cost, it has been cut almost in half to $1.85 trillion. A scaled-back draft from October 28 excluded free community college, dental and vision benefits from Medicare, provisions to lower prescription drug prices and paid family leave. But the new House text re-introduced the last two benefits on November 5.
Biden said that while “no one got everything they wanted,” the scaled-back $1.85 trillion spending bill invests billions in health care, child care, housing and the climate.
The president specifically highlighted programs that:
- pay for senior home assistance
- cap child care expenses at a maximum of 7% of income for families making less than $300,000
- reduce more than one billion metric tons of greenhouse emissions (with a goal of cutting them by at least 50% in 2030)
Other provisions include:
- universal preschool for three- and four-year-olds
- a one-year extension of the expanded child tax credit
- expand utility and clean energy tax credits
- increase Pell Grants by $550
- expand Obamacare to additional states
- reduce health insurance costs for lower and middle class participants who get health coverage on Obamacare exchanges
- fund Medicare to pay for the cost of hearing aids
Additionally, the new House bill would raise the State and Local Tax (SALT) deduction “by increasing and applying the cap over the long-term” so that states and counties could get more revenue for essential public services. These include “emergency response services, public health services, and infrastructure development.”
The White House said on October 28 that the $1.85 trillion Build Back Better bill aims to help the United States meet climate goals, create new jobs and grow the economy “from the bottom up and the middle out.”
The table below breaks down 10 key programs from the new House bill:
|$1.85 Trillion Build Back Better Bill|
|$555 Billion||Clean Energy and Climate Investments||The White House says that this program “will cut greenhouse gas pollution by well over one gigaton in 2030,” as well as reduce consumer energy costs, provide cleaner air and water, and create “thousands of high-quality jobs.”|
|$400 Billion||Child Care and Preschool||Will allow states to expand access to free preschool for over six million 3- and 4-year-old children annually. The White House says preschool in the United States costs roughly $8,600 annually. This program will also help expand access to affordable child care for roughly 20 million children per year (which covers nine out of 10 families with young children nationwide). And saves parents earning $100,000 with one toddler more than $5,000 per year. The bill also “permanently authorizes the first-ever national paid and medical leave guarantee for U.S. workers.”|
|$200 Billion||Child Tax & Earned Income Tax Credits||The Build Back Better framework will extend the the American Rescue Plan’s expanded Child Tax Credit for one additional year, offering 35 million families up to $3,600 ($300 monthly) in tax cuts for every qualifying child. This program will also “cut taxes for 17 million low-wage workers by extending the expanded Earned Income Tax Credit.”|
|$150 Billion||Home Care||The White House says there are currently more than 800,000 older Americans, people with disabilities, and others seeking home care services on state Medicaid waiting lists. And this program could deliver affordable care to families paying roughly $5,800 annually for four hours of home care per week.|
|$150 Billion||Housing||Build, rehabilitate and improve more than one million affordable homes. The White House says this program is the “single largest and most comprehensive investment in affordable housing in history.”|
|$130 Billion||Affordable Care Act Health Insurance||Aims to reduce premiums for nine million Americans. Will extend the expanded Premium Tax Credit and deliver health care coverage to four million uninsured people who are locked out of Medicaid. You should note that the new bill also caps “annual out-of-pocket prescription drug costs under Medicare at $2,000,” which saves more than one million seniors $1,200 each year. The expansion of the Affordable Care Act will also require “all insurance companies to provide insulin for no more than $35 a month.”|
|$100 Billion||Immigration||Improve the immigration system by providing relief to millions through reconciliation, reducing backlogs, expanding legal representation, and making the asylum system and border processing more “efficient and humane.”|
|$90 Billion||Equity and Other Investments||Advance equity by investing in maternal health, community violence interventions, and nutrition programs. The new House bill invests $10 billion to expand eligibility for free school meals during the school year and provide $65 for every child monthly to buy food in the summer.|
|$40 Billion||Higher Education and Workforce||This program will aim to expand access to affordable, high-quality education beyond high school. Legislation would raise the maximum Pell Grant by $550 for over 5 million students.|
|$35 Billion||Medicare Hearing||Expand Medicare for older Americans to cover hearing aids and exams. The White House says that only 14% out of roughly 48 million Americans with hearing loss could afford hearing aids – a pair costs more than $5,000 on average.|
How Does It Compare With the $3.5 Trillion Agreement?
Democratic legislators had reached a $3.5 trillion Budget Committee agreement on July 13 to make the “biggest investment in the middle class in decades and act on the climate crisis.” The agreement, combined with the $1.2 trillion bipartisan plan, would have added up to $4.7 trillion.
Schumer said this will fund every major program that Biden asked for in his Build Back Better legislation proposals and make additions that expand Medicare, as well as healthcare funding for dental, vision and hearing.
“We are very proud of this plan. We know we have a long road to go. We’re going to get this done for the sake of making average Americans’ lives a whole lot better,” he told press.
The president met with the Senate Democratic Caucus on July 14 to support the Budget Committee agreement. The White House said that Biden described the Build Back Better agenda as a continuation of the American Rescue Plan, and emphasized that both economic policies are “built from the bottom up, with a recognition for the role that a good job plays in peoples’ lives.”
You should note that while the new bipartisan agreement aims to revitalize the American economy, it targets funds mostly for roads, water, electricity, broadband internet and other physical infrastructure projects.
Comparatively, the additional $3.5 trillion Budget Committee agreement focused more on human infrastructure programs that expand Medicare funding and coverage, support affordable childcare and free college education initiatives, and create pathways for employment, as well as transform the country’s energy system to address climate change needs.
Budget Committee Chairman Bernie Sanders (I-VT) told press that the new Democratic agreement would “create millions of good paying union jobs rebuilding this country not only from a physical infrastructure, but dealing with the human needs of our people which are many, and which have long been neglected.”
The table below breaks down key components from the $3.5 trillion infrastructure agreement. Budgets and programs are based on the FY 2022 Budget Resolution Agreement Framework presented by Senate Democrats on August 9:
|$3.5 Trillion Infrastructure Agreement|
|$726 Billion||Committee on Health, Education, Labor and Pensions||Fund universal pre-K for 3- and 4-year olds. Provide child care for working families. Create tuition-free community college. Invest in HBCUs, MSIs, HSIs, TCUs, and ANNHIs. Increase the maximum Pell grant award. Invest in school infrastructure, student success grants, and educators. Fund primary care. Invest in maternal, behavioral and racial health equity. Fund pandemic preparedness initiatives. Promote workforce development and job training, among other initiatives.|
|$332 Billion||Committee on Banking, Housing and Urban Affairs||Create and preserve affordable housing. Provide down payment assistance, rental assistance, and other homeownership initiatives. Develop and revitalize communities through zoning, land use and transit improvements. Invest in public housing and sustainability.|
|$198 Billion||Committee on Energy and Natural Resources||Create a clean electricity payment program. Fund consumer rebates to weatherize and electrify homes. Finance domestic manufacturing of clean energy and auto supply chain technologies. Procure energy efficient materials. Fund climate research, infrastructure research for DOE National Labs, hard Rock mining and Department of Interior programs.|
|$135 Billion||Committee on Agriculture, Nutrition and Forestry||Fund agriculture conservation, drought and forestry programs to help reduce carbon emissions and prevent wildfires. Invest in rural development and rural co-op clean energy. Fund agricultural climate and infrastructure research, among other initiatives.|
|$107 Billion||Committee on the Judiciary||Seek lawful permanent status for qualified immigrants. Invest in smart and effective border security measures. Fund a community violence intervention initiative.|
|$83 Billion||Committee on Commerce, Science and Technology||Invest in technology and transportation. Fund research, manufacturing and economic development. Invest in coastal resiliency and healthy oceans. Fund National Science Foundation research and technology directorate.|
|$67 Billion||Committee on Environment and Public Works||Create clean energy technology accelerator to fund low-income solar and other climate-friendly technologies. Make environmental justice investments in clean water affordability and access, healthy ports and climate equity. Fund EPA climate and research programs. Make Federal investments in energy efficient buildings and green materials. Invest in clean vehicles. Administer a methane polluter fee to reduce carbon emissions.|
|$37 Billion||Committee on Homeland Security and Governmental Affairs||Electrify the federal vehicle fleet (including USPS and Non-USPS). Electrify and rehabilitate federal buildings. Improve cybersecurity infrastructure. Make border management investments, among other initiatives.|
|$25 Billion||Committee on Small Business and Entrepreneurship||Provide small business access to credit, investment, and markets.|
|$20.5 Billion||Committee on Indian Affairs for Health, Education and Housing Programs for Native Americans||Fund Native American health programs and facilities. Invest in education programs and facilities, as well as housing programs, energy programs, resilience and climate programs, BIA programs and facilities, language programs and the Native Civilian Climate Corps.|
|$18 Billion||Committee on Veterans Affairs for Upgrades to VA Facilities||Upgrade VA facilities.|
What’s in the $1.2 Trillion Bipartisan Infrastructure Bill?
The $1.2 trillion infrastructure bill is limited largely to physical infrastructure, authorizing the federal government to spend new funds on roads and bridges, public transit, clean drinking water and waste water systems, high-speed internet and clean energy, among other projects.
The bill that passed on November 5 has been on the table since July 28, when the president joined a group of bipartisan Senators to announce that they had reached a deal “to make the most significant long-term investment in our infrastructure and competitiveness in nearly a century.”
The 2,702-page legislative text for a $1.2 trillion infrastructure bill was officially presented on August 1. This legislation combines previously approved funds with $550 billion in new spending that the Senate approved as part of the bipartisan deal on July 28.
Let’s break down in the table below key components from this new bipartisan infrastructure bill. Budgets and programs are based on the White House Fact Sheet that was presented on July 28:
|$550 Billion Bipartisan Infrastructure Bill|
|$110 Billion||Roads, Bridges and Major Projects||Bridge and road repairs will focus on climate change mitigation, resilience, equity and safety for users, including pedestrians and cyclists. The proposal includes $40 billion for bridge repair, replacement and rehabilitation; and $16 billion for major projects. The White House says this is the largest investment in bridges since the interstate highway system was approved in 1956.|
|$105 Billion||Public Transit/Passenger and Freight Rail||Modernize and expand the transit rail networks for millions of Americans nationwide. The White House says this is the largest federal investment in public transit history ($39 billion), and the largest federal investment in passenger rail ($66 billion) since Amtrak was created.|
|$73 Billion||Power Infrastructure||Build thousands of miles of new, resilient transmission lines. This will facilitate and expand renewable energy. The White House calls this largest clean energy transmission investment in American History.|
|$65 Billion||High-Speed Internet||Inspired by historic effort to electrify every American home almost one hundred years ago, this plan aims to connect every American with reliable high-speed internet. The White House says this framework will lower service prices and close the digital divide.|
|$55 Billion||Clean Drinking Water||Deliver clean drinking water to 10 million American families and more than 400,000 schools and child care facilities. This will also remove lead service lines and pipes. The White House says this is the biggest investment in clean drinking water and waste water infrastructure in American History.|
|$50 Billion||Climate Change and Cybersecurity||Prepare infrastructure for the impacts of climate change, cyber attacks and extreme weather conditions. The White House says this is the biggest investment in the resilience of physical and natural systems in American history. Resilience can be defined as an infrastructure’s ability to absorb changes while retaining basic functionality and capacity.|
|$25 Billion||Airports||Modernize American airports with terminal renovations and multimodal connections that aim to provide affordable access for passengers and workers.|
|$65 Billion||Additional Programs||These include: Environmental Remediation ($21 billion). Ports and Waterways ($17 billion). Safety ($11 billion). Electrical Vehicle Infrastructure ($7.5 billion). Electric Buses/Transit ($7.5 billion). Reconnection Communities ($1 billion).|
How Will Biden Pay for the $3 Trillion Plan?
The White House said on June 24 that the $1.2 trillion Infrastructure Investment and Jobs Act would be financed by:
- closing the tax gap
- redirecting unspent emergency relief funds
- targeted corporate user fees
- new revenue from infrastructure investment
Comparatively, the House’s $1.85 trillion Build Back Better Act proposes a surcharge on high income individuals, estates and trusts for taxpayers with an adjusted gross income (AGI) over $10 million. This AGI limit is set at $5 million for married individuals filing separately and $200,000 for estates or trusts.
The legislation also imposes an additional 3% surcharge on taxpayers with AGIs over $25 million. A lower AGI limit is set at $12.5 million for married taxpayers filing separately and $500,000 for estates or trusts. The White House initially estimated on October 28 that a 2% AGI surcharge could raise $230 billion in revenue.
For a full breakdown of how much money the House Build Back Better Act could raise, the table below estimates revenue from high earner taxes, health care and other offsets. Data is based on November 18 projections from the Committee for a Responsible Federal Budget. (We broke out corporate tax revenue separately in the “How Would Biden’s Plan Raise Corporate Taxes” section below.)
|House Build Back Better Act Offsets|
|Estimated Revenue||Policy Changes||Offsets|
|$640 Billion||Increase Taxes on Individual High Earners||3.8% net investment income tax increase ($250 billion). 5% surtax on income over $10 million and 8% surtax on income above $25 million (230 billion). Expanded limits on business loss deductions (160 billion).|
|$325 Billion||Health Care Changes and Cost Reductions||Reform Part D Medicare drug coverage, cap drug price growth and allow targeted drug price negotiations ($160 billion). Repeal drug rebate rule enacted by the Trump administration ($145 billion). Lower disproportionate share hospital (DSH) payments to qualifying hospitals serving large numbers of Medicaid and uninsured individuals beyond 2025 (20 billion).|
|$180 Billion||Additional Revenues||Fund the IRS to reduce the tax gap ($130 billion). Reinstate oil superfund taxes and impose a methane fee ($20 billion). Expand nicotine taxes (10 billion). Reform tax treatment of retirement accounts ($10 billion). Other receipts ($10 billion).|
The committee also projected that establishing an $80,000 SALT deduction cap from 2026 through 2030 and then a $10,000 cap in 2031 could bring in an additional $290 billion in revenue. However, it pointed out that this would likely result in lower revenue collection over time because Congress would have to approve additional expenses by extending the Tax Cuts and Jobs Act (TCJA).
Combined with $830 billion in projected revenue from corporate tax increases, the committee estimates that the House’s Build Back Better offsets could bring in a total of $2.27 trillion, which would raise the deficit by $160 billion.
In addition to these provisions, it’s also worth noting that Senate Finance Committee Chair Ron Wyden (D-OR) had presented on October 27 an updated version of the Billionaires Income Tax with the aim of ensuring that “billionaires pay tax every year, just like working Americans.” The new House bill, however, excludes this tax.
Currently, wealthy Americans pay short-term and long-term capital gains taxes depending on when they sell their assets. But Wyden’s proposal would have mandated annual taxes on the increased value of assets, no matter how long they are held. It was estimated that the tax would have targeted roughly 700 of the wealthiest American taxpayers with more than $1 billion in assets or more than $100 million in income over three consecutive years. Pelosi anticipated this could have brought up to $250 billion in additional revenue.
Biden has pledged that the $3 trillion infrastructure and spending legislation will not “raise taxes on anyone making less than $400,000 a year.”
How Would Biden’s Plan Raise Corporate Taxes
The Committee for a Responsible Federal Budget said on November 18 that Biden’s Build Back Better legislation would raise $830 billion in corporate tax increases.
- 15% corporate minimum tax on large corporations earning more than $1 billion in profits (raising $320 billion)
- 15% global minimum tax and reform international taxation (raising $280 billion)
- levy a 1% surcharge on stock buybacks, which is the amount that companies spend to repurchase shares (raising $125 billion)
- enact other corporate tax reforms (raising $105 billion)
For additional context, it’s worth noting that Biden had already announced during his presentation of the American Jobs Plan in March that half of the infrastructure and jobs package could be paid for by raising corporate taxes from 21% to 28%, which would have generated $1 trillion in additional revenue.
“We’re going to raise the corporate tax,” he said on March 31. It was 35%, which is too high. We all agreed, five years ago, it should go down to 28%, but they reduced it to 21%. We’re going to raise it back to—up to 28%. No one should be able to complain about that. It’s still lower than what that rate was between World War Two and 2017. Just doing that one thing will generate $1 trillion in additional revenue over 15 years.”
The House Ways and Means Committee later proposed a lower graduated corporate tax increase up to 26.5% in September (see the House Ways and Means Committee Corporate Tax Proposals table below). This tax change aimed to roll back President Donald Trump’s 2017 Tax Cuts and Jobs Act, which set the current 21% flat tax rate for all businesses. Trump’s tax reduction was a big change from previous tax years, ending marginal rates across eight income tax brackets listed in the table below:
|2017 Corporate Tax Rates|
|$0 – $50,000||15%|
|$50,000 – $75,000||25%|
|$75,000 – $100,000||34%|
|$100,000 – $335,000||39%|
|$335,000 – $10,000,000||34%|
|$10,000,000 – $15,000,000||35%|
|$15,000,000 – $18,333,333||38%|
You should keep in mind that even when the corporate tax rate was as high as 35%, a 2013 report from the Government Accountability Office (GAO) initially estimated that U.S. corporations paid an average effective tax rate of 12.6%. This was later revised to 22.9%, but tax experts generally agree that most businesses do not pay the full corporate tax rate after claiming deductions and credits.
In an effort to rally support for the corporate tax hike, the president said during his March speech that almost one-fifth of Fortune 500 companies, including Amazon, took advantage of tax loopholes to avoid paying federal income taxes.
“In 2019, an independent analysis found that…91 Fortune 500 companies—the biggest companies in the world, including Amazon—they used various loopholes so they’d pay not a single solitary penny in federal income tax,” he said. “I don’t want to punish them, but that’s just wrong. That’s just wrong. A fireman and a teacher paying 22%? Amazon and 90 other major corporations are paying zero in federal taxes?”
Biden had also said that he would raise additional revenue to pay for the American Jobs Plan by establishing a global minimum tax rate of 21% to eliminate loopholes and foreign tax credits that large multinational companies could claim to avoid paying federal taxes.
“We’re establishing a global minimum tax for U.S. corporations of 21%,” the president said. “We’re going to level the international playing field. That alone will raise $1 trillion over 15 years. We’ll also eliminate deductions by corporations for offshoring jobs and shifting assets overseas.”
On April 5, Treasury Secretary Janet Yellen rallied behind Biden’s plan, calling for a global minimum corporate tax rate.
“Together we can use a global minimum tax to make sure the global economy thrives based on a more level playing field in the taxation of multinational corporations, and spurs innovation, growth, and prosperity.”
The table below breaks down seven specific corporate tax changes based on the proposals that the House Ways and Means Committee presented on September 13:
|House Ways and Means Committee Corporate Tax Proposals|
|Increase Graduated Corporate Taxes to 26.5%||The graduated corporate tax structure raises 18% on the first $400,000 of income; 21% on income up to $5 million, and 26.5% on all other income above that. The graduated rate phases out for corporations making more than $10 million. Personal services corporations are not eligible for graduated rates.|
|Raise Corporate Taxes on Overseas Earnings to 16.6%||The Global Intangible Low-Taxed Income (GITLI), which taxes earnings by U.S. controlled foreign corporations (CFCs), currently ranges from 10.5% to 13.125%. This proposal would raise the tax rate to 16.5625%.|
|Reduce the Qualified Business Asset Investment (QBAI) Exemption to 5%||The QBAI exemption allows companies to deduct 10% in foreign tangible assets like property and equipment from its GITLI income. The House proposes reducing this exemption to 5%. Biden initially wanted to eliminate the exemption altogether.|
|Raise the Base Erosion and Anti-Abuse Tax (BEAT) to 12.5% in 2024 and 15% in 2026 and After||BEAT levies a minimum 10% tax on foreign and domestic corporations doing business in the U.S. It aims to prevent large multinationals from moving profits outside of the country to avoid domestic tax liability. The proposal would raise BEAT up to 12.5% after December 31, 2023, and 15% after December 31, 2025. The the base erosion minimum tax amount would also be determined by taking into account tax credits.|
|Increase the Holding Period for Carried Interest and Capital Gains to Five Years||Investment funds currently holding assets for more than three years can benefit from the lower long-term capital gains tax, which the House proposes raising the top federal rate from 20% to 25% (28.8% with the 3.8% net investment income tax.) Assets held for less than three years are taxed at the higher ordinary income tax rate (the top marginal individual income tax rate is 37%, but the House also proposes raising it to 39.6%.) The new holding period for long-term capital gains would now be extended to five years.|
|Exclude Taxpayers With AGI Over $400,000 From Qualified Small Business Stock (QSBS) Exemptions||Currently capital gains from QSBS are exempt from federal taxes. The proposal amends section 1202(a) of the tax code to limit special 75% and 100% exclusion rates to taxpayers with an adjusted gross income less than $400,000. However, the baseline 50% exclusion rate would still be available to all taxpayers.|
|Invest $79 Billion in IRS Resources||This provision appropriates $78,935,000,000 for necessary IRS expenses to strengthen tax enforcement, increase voluntary compliance, and modernize information technology to support enforcement activities effectively.|
For a comparison, the table below breaks down eight initial corporate tax changes that the White House fact sheet presented on March 31:
|Biden Tax Plan for Corporations|
|Raise Corporate Tax Rate to 28%||Roll back Trump’s 2017 corporate tax reduction, which currently set a 21% flat tax for all businesses. This increase aims to generate $1 trillion in additional revenue over 15 years.|
|Increase Global Minimum Tax to 21%||Increase the global minimum tax on U.S. corporations from 10.5% to 21%. Multinationals currently shift profits and jobs overseas with a tax exemption for the first 10% return on foreign assets, and the rest is taxed at half the domestic rate. Biden said this will generate an additional $1 trillion in 15 years.|
|Prevent Tax Havens for U.S. Corporations||Prevent U.S. corporations from inverting or claiming tax havens as a residence to avoid paying taxes. Currently, U.S. corporations can acquire or merge with foreign companies to claim that they are a foreign company even while managing and running operations in the U.S.|
|Eliminate Expense Deductions for Offshoring Jobs||Eliminate and replace tax expense deductions that U.S. companies can write off from offshoring jobs and provide a tax credit to support the on-shoring of jobs.|
|Eliminate Loophole for Intellectual Property||Eliminate the Foreign Derived Intangible Income (FDII) enacted by the Trump tax plan, which the White House describes as an intellectual property loophole that allows corporations to get tax breaks for shifting assets abroad. This revenue will be used to expand R&D investment incentives.|
|Enact 15% Minimum Tax on Large Corporations||Apply a 15% minimum tax on the book income of the largest corporations. Corporations use this income to report profits to investors.|
|Eliminate Tax Preferences for Fossil Fuels||Eliminate current subsidies, loopholes and special foreign tax credits available to the fossil fuel industry. Make polluters pay into a Superfund Trust Fund to cover the cost of cleanups.|
|Invest in IRS Resources||Increase IRS funding to enforce the tax law and prevent tax evasion from corporations. The White House says that 10 years ago almost all large corporations were audited annually. Today that number has fallen to less than half.|
Will Biden’s Infrastructure Plan Raise the Deficit?
The Congressional Budget Office (CBO) said on November 18 that the $1.85 trillion Build Back Better Act would increase the deficit by $367 billion in 10 years. It noted, however, that this estimate does not count “any additional revenue that may be generated by additional funding for tax enforcement.”
It’s also worth noting that the Committee for a Responsible Federal Budget narrows that deficit. Based on the CBO’s score, it concludes that the House’s Build Back Better Act will cost more than $2.4 trillion in spending increases and tax cuts through 2031 but bring in almost $2.3 trillion in offsets. Though the committee qualifies its estimate by saying that “the numbers can vary depending on how certain provisions are classified.”
On November 30, the committee also said that if all Build Back Better Act extensions were enacted without offsets, the legislation would increase the deficit from $160 billion to $2.8 trillion.
For reference, the CBO had already projected on August 5 that the $1.2 trillion Infrastructure Investment and Jobs Act alone would increase the U.S. deficit by $256 billion from 2021 to 2031. This means that roughly half of the $550 billion in new spending for highways, transit programs, and other projects will be paid for by adding to the national debt.
Data from the University of Pennsylvania’s Penn Wharton Budget Model elevated that deficit from the bipartisan infrastructure bill to $351 billion. However, the analysis also concluded that the “proposal would have no significant effect on GDP by end of the budget window (2031) or in the long run (2050).”
The CBO projected on August 5 that the federal budget deficit will reach $3 trillion in fiscal year 2021 and average $1.2 trillion per year from 2022 to 2031. You should note that this estimate is based on the assumption that the current tax and spending laws remain the same.
How Does Biden’s Original $2.3 Trillion Plan Compare?
Biden’s original infrastructure proposal called for an infrastructure and jobs plan that would have spent more than $2 trillion, or 1% of the U.S. GDP annually. His American Jobs Plan, which was presented in March, similarly focused on clean-energy, electric automobiles, nationwide broadband access and workplace development programs, among other investments.
For a comparison with the bipartisan deal, more than half of the president’s first infrastructure plan targeted transportation, elderly and disabled care, and manufacturing—adding up to $1.321 trillion. The plan also called specifically to fund $213 billion for housing and $180 billion for tech research and development, as well as investing $311 billion in water, clean-energy and internet systems; $100 billion to upgrade and build schools and child care centers, and $100 billion in workforce training over the next eight years.
The table below breaks down key components from Biden’s original infrastructure and jobs plan. Programs and budgets are based on the White House Fact Sheet that was presented on March 31:
|Biden’s $2.3 Trillion American Jobs Plan|
|$621 Billion||Transportation||Repair roads and bridges ($115 billion). Modernize public transit ($85 billion). Invest in passenger and freight rail service ($80 billion). Build electric vehicles ($175 billion). Improve ports, waterways and airports ($42 billion). Redress historic inequities and advance future infrastructure ($45 billion). Improve infrastructure resilience ($50 billion).|
|$400 Billion||Elderly and Disabled Care||Expand access to affordable homes or community-based care. This includes: Expanding access to long-term care services under Medicaid. Create infrastructure for well-paying caregiving jobs.|
|$300 Billion||Manufacturing||Strengthen manufacturing supply chains for critical goods. This includes: Creating a new office at the Department of Commerce to monitor domestic industrial capacity and fund production ($50 billion). Semiconductor manufacturing and research ($50 billion). Invest in countermeasures to protect against future medical pandemics and prevent severe job losses. ($40 billion). Clean energy manufacturing ($46 billion). Invest in regional innovation hubs and a Community Revitalization Fund ($20 billion). Invest in domestic manufacturers ($52 billion). Create national small business incubator and innovation hub network ($31 billion). Partner with rural and Tribal communities to create jobs and support economic growth ($5 billion).|
|$213 Billion||Housing||Produce, preserve and retrofit over two million affordable and sustainable homes. This includes: Tax credits to rehabilitate or build 500,000 low and middle class homes ($20 billion). Improve public housing system infrastructure ($40 billion). Clean energy investment to upgrade homes and businesses ($27 billion).|
|$180 Billion||Tech Research and Development||Upgrade American research infrastructure ($40 billion). Promote collaboration and build on government programs ($50 billion). R&D job creation and innovation ($30 billion). Clean energy technology and clean energy jobs ($35 billion). Climate-focused research and climate R&D projects ($20 billion). R&D investment at HBCUs and other MSIs ($25 billion).|
|$111 Billion||Water||Replace lead pipes and service lines ($45 billion). Upgrade and modernize national drinking water, wastewater and stormwater systems; and tackle new contaminants and support rural clean water infrastructure nationwide ($66 billion).|
|$100 Billion||Internet||Build high-speed broadband infrastructure to reach 100% coverage nationwide. Promote price transparency and competition among internet providers. Reduce broadband internet cost through widespread service.|
|$100 Billion||Power||Build an electric transmission system that moves cheap, clean electricity nationwide. Modernize power generation to deliver clean electricity. Plug orphan oil and gas wells and clean up abandoned mines ($16 billion). Remediate and redevelop Brownfield and Superfund sites ($5 billion). Public land and water conservation jobs ($10 billion).|
|$100 Billion||Schools||Upgrade and build new public schools ($50 billion direct grants, $50 billion leveraged through bonds). Invest in community college infrastructure ($12 billion). Upgrade and build new child care facilities ($25 billion).|
|$100 Billion||Workplace||Support workers with next generation training programs. This includes: Creating a new Dislocated Workers Program and sector-based training ($40 billion). Target workforce development opportunities in underserved communities ($17 billion). Increase the capacity of existing workforce development and worker protection systems ($48 billion).|
|$28 Billion||VA Hospitals and Federal Buildings||Modernize Veterans Affairs hospitals and clinics ($18 billion). Buy, build or renovate federal buildings ($10 billion).|
Keep in mind that Republicans had also presented an alternative infrastructure plan worth approximately one-quarter of Biden’s original plan ($568 billion) on April 22. The Republican counterproposal limited spending to rebuilding roads and bridges, airports and ports, public transit systems, water, broadband and other networks.
So What Could the Infrastructure Plan Mean for You?
Politicians on both sides of the aisle have looked towards infrastructure as a way to lay the foundation for a unified country. But Biden said last March that the American Jobs Plan aims to do more than just fix potholes and reduce gridlock traffic. His plan aims to rebuild the middle class so that a greater number of people could prosper.
“You know, this is not to target those who’ve made it; not to seek retribution. This is about opening opportunities for everybody else,” he said in April. “And it’s time—in this time, we’ll rebuild the middle class. We’re going to bring everybody along. Regardless of your background, your color, your religion, (inaudible) everybody gets to come along.”
The American Society of Civil Engineers also points out that without necessary investments in infrastructure, families will lose more than $3,300 in disposable income every year between 2020 and 2039 – that’s roughly $9 per day or $66,000 in 20 years – due to deficiencies.
SmartAsset’s 2021 study also shows that infrastructure needs are uneven across the country. Electric outages in Arizona, for example, could last only about 53 minutes on average. While an outage in West Virginia could last more than seven times longer than Arizona. For more information, read SmartAsset’s state rankings for the best infrastructure in 2021 and 2019.
SmartAsset broke down how much each state will get from Biden’s $1.2 trillion Infrastructure Investment and Jobs Act in a state-by-state table here.
Let’s take a look at four ways the new bipartisan infrastructure plan will impact you the most:
You will save time on your commute. The U.S. Census Bureau says that the average commute for 148 million workers in 2019 took 27.6 minutes to get to work each way. This is an all-time record high since the bureau started collecting travel data in 2006. The White House also points out that households taking public transportation to work “have twice the commute time.” The bipartisan plan calls on Congress to invest $105 billion in public transit and passenger and freight rail, as well as an additional $7.5 billion that will also in part fund electric buses. These upgrades aim to ultimately reduce traffic congestion for everyone.
The government will build chargers for your electric car. Biden initially wanted to provide tax incentives and point-of-sale rebates to help “all American families afford clean vehicles of the future.” He has already proposed $174 billion for electric vehicles and charging stations, which includes $100 billion in consumer rebates. But the White House says the bipartisan plan calls on Congress to invest only $7.5 billion to “build a national network of electric vehicle (EV) chargers along highways and in rural and disadvantaged communities.” The president set an initial goal of building 500,000 EV chargers by 2030.
You will have faster and cheaper internet. Biden wants to connect “high-speed, affordable, reliable Internet wherever you live.” The White House says that more than 35% of rural America lacks access to reliable high-speed internet. And the new bipartisan deal allocates $65 billion to bridge the internet gap between rural and urban Americas with the construction of high-speed broadband infrastructure that can reach 100% coverage nationwide.
More pathways to good-paying jobs. Biden wants clean energy and infrastructure investments from the federal government to support prevailing wages and labor jobs. The White House says that the bipartisan infrastructure plan can “create good-paying union jobs and advance environmental justice.”
The House passed the $1.85 trillion Build Back Better Act with a narrow vote of 220 to 213 on November 19, just five days after Biden had signed the $1.2 trillion bipartisan infrastructure bill into law. Combined, both bills will invest roughly $3 trillion in roads, water, electricity, broadband internet and other physical infrastructure projects, as well as expand legislation to fund health, education and climate programs.
The White House says the legislation will create good-paying union jobs and economic growth for a generation of Americans, and position the United States as a 21st century leader in technology and the environment.
“This deal signals to the world that our democracy can function, deliver, and do big things,” Biden said on July 28. “As we did with the transcontinental railroad and the interstate highway, we will once again transform America and propel us into the future.”
The $1.85 trillion Build Back Better Act will now move to the Senate, where it still needs to get approved before Biden could sign it into law.
SmartAsset will continue to update this article as soon as more information becomes available.
Tips for Getting Through a Tough Economy
- If you don’t have any pressing needs or high-interest debt, consider investing your tax refund or stimulus check in your long-term finances. A financial advisor can help you manage your money or investments. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you are struggling to keep up with loan or credit card payments, you can take steps to protect your credit score and speak with your bank directly to see whether you can defer loan payments or waive certain fees.
- If you can afford it, investing in index funds during a recession is a safe option. But if you’re looking for a slightly more aggressive approach, check out some free investment classes to learn more.
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