Joe Biden said he is open to compromise on his $2tn infrastructure plan amid a backlash from businesses over a proposed $2.5tn increase in corporate taxes to fund it.
Biden’s latest economic package seeks to plough huge sums of government investment into the US economy, paid for largely by the tax rises on America’s biggest businesses.
“It is the single largest investment in American jobs since World War II, and it is a plan to put millions of Americans to work to fix what is broken in our country,” Biden said in a speech in Washington on Wednesday.
“Debate is welcome. Compromise is inevitable. Changes are certain,” he added.
The president said he and Kamala Harris, vice-president, would meet with Republicans and Democrats in the coming days to hear their views on the infrastructure plan, which would need to be approved by both the House of Representatives and the Senate.
“We will be open to good ideas and good faith negotiations,” Biden added. “But here is what we won’t be open to: we will not be open to doing nothing. Inaction simply is not an option.”
When asked if he was willing to negotiate specifically on proposals to raise the corporate tax rate to 28 per cent, Biden replied: “I am willing to negotiate that, but we have to pay for this. I am open.”
Earlier on Wednesday, Janet Yellen, US Treasury secretary, called on corporate America to embrace what she called “mutually beneficial” tax increases, saying Biden’s $2tn plan would deliver a 1.6 per cent boost to gross domestic product by 2024.
“America’s corporate tax system has long been broken, so too has been the way we think about corporate taxation: tax reform is not a zero-sum game, with corporations on one side and government on the other,” Yellen told reporters. “There are policies that are mutually beneficial. Win-win is a very overused phrase, but we have a real one in front of us now.”
The US Treasury secretary and former Fed chair stressed that the revenue generated from the corporate tax increases would be “turned into funding to both traditional infrastructure, and the more modern kind needed to run a digital economy, like high-speed broadband networks”. Within four years, the plan would boost US economic output by 1.6 per cent, she said.
The White House is trying to gather momentum for its plans ahead of tough congressional negotiations.
Republicans and many business groups who are traditionally sympathetic to infrastructure spending are balking at the corporate tax increases, saying they will stymie the recovery and make American multinationals less competitive. But Biden and top administration officials said on Wednesday they were flexible on the details.
“There is room for compromise. That is clear,” Gina Raimondo, the commerce secretary and former governor of Rhode Island, told reporters at the White House.
“Our proposal is to invest in eight years and pay back over 15,” she said. “Now, we can have a discussion about that. Should we pay it back over 20 instead of 15? Is the rate not quite 28? Is it something lower?
“What we cannot do, and what I am imploring the business community not to do, is to say we don’t like 28, we are walking away, we are not discussing it,” she added. “That is unacceptable. Come to the table and problem-solve with us to come up with a reasonable, responsible plan.”
In a detailed report, the US Treasury said the proposal would raise US corporation tax to 28 per cent, and put in place a minimum tax of 15 per cent on book income on top of any company’s regular tax liability.
Book income, which is the profit reported to investors, is often higher than the taxable income reported to the US tax authorities. The minimum tax would apply to about 45 companies earning more than $2bn in net profits, increasing their tax liability by about $300m, the Treasury said.
The Biden administration also wants to double the rate at which overseas earnings are taxed from 10.5 per cent to 21 per cent, and eliminate US tax deductions claimed by companies making payments to “related parties” in low-tax jurisdictions.
Officials added that they would strengthen “anti-inversion” rules that allow companies to change their tax domicile through M&A activity, and replace a Trump-era tax break for exporters with new tax incentives aimed at boosting domestic research and development.