The broad-based corporate tax increase, which was one of the funding mechanisms for President Joe Biden’s Build Back Better domestic agenda, has apparently been jettisoned in the new $1.75 trillion framework that Biden pitched to Democrats in Congress on Thursday.
Biden’s latest scaled-down plan would instead pay for the expanded social programs and climate change initiatives with a new 15% minimum tax on the reported profits of large corporations, a 1% buyback on corporate stock buybacks, and a 5% surtax on adjusted gross income above $10 million, with another 3% on AGI over $25 million, according to news reports in The Washington Post and other publications.
“While NJBIA is still concerned about any tax increase making our nation and our state less competitive, NJBIA is pleased to see the movement away from some of the broader business tax increases, which NJBIA opposed, that had been contained in earlier versions of the president’s proposal,” NJBIA Vice President of Government Affairs Christopher Emigholz said.
The original Biden plan would have raised the federal corporate tax rate from 21% to 28%. Congress later reduced the proposed rate to 26.5% in its version of the plan, but that still would have disproportionately hurt New Jersey manufacturers that already pay the highest state Corporation Business Tax. The state CBT, when combined with the proposed federal corporate tax, would have saddled New Jersey manufacturers and other corporations with the highest combined corporate taxes in the world.
The president pitched the new domestic spending bill to Congress in an effort to break the stalemate in his own political party that has stalled the separate bipartisan $1 trillion infrastructure bill, which some Democrats are refusing to vote for unless there is first an agreement on the so-called reconciliation bill that expands social safety net programs and addresses climate change.
According to news reports, some of the major programs that remain in the revised plan include $550 billion to fight climate change mainly through tax incentives for low-emission sources of energy; $400 billion for universal pre-K for 3-year-olds and 4-year-olds; $40 billion for worker training programs and $165 billion to reduce health insurance premiums for those covered by the Affordable Care Act.
Gov. Phil Murphy congratulated President Biden on securing a framework for “historic investments in working- and middle-class American families.”
“This proposed framework ensures childcare, pre-K and elder care is affordable for all Americans, makes healthcare more affordable, invests hundreds of billions of dollars in resiliency and the green economy, and strengthens middle class families through investments in housing and workforce development,” Murphy said.