Former Nuveen chief equity strategist and senior portfolio manager Bob Doll provides insight into future economic growth and how markets are reacting to more spending.
Treasury Secretary Janet Yellen said on Tuesday that President Biden is exploring changes to the tax structure to offset the cost of the Democrats’ next big package of economic spending.
When testifying before the House’s Financial Services Committee, Yellen said that an infrastructure package – which the White House should pursue as its next legislative priority – is likely to be paid for by reforms to the tax code.
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“We hope to examine changes in tax policy, along with programs that will address some of the longstanding problems that have restricted productivity and the labor supply in the United States,” said Yellen. “We are going to address the infrastructure, the risks of clots from climate change, education, training.”
The specific outlines of the infrastructure package and the tax increases it may include are still unclear; however, Biden has repeatedly pledged during the 2020 presidential campaign to increase the corporate tax rate from 21% to 28%, to increase the income tax rate for individuals earning more than $ 400,000, to expand the property tax, to create a highest capital gains tax rate for individuals earning at least $ 1 million annually and reducing tax preferences for so-called on-lending companies.
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An analysis of Biden’s tax plan conducted by the Tax Policy Center estimated that it would raise $ 2.1 trillion in new revenue in a decade.
Treasury Secretary Janet Yellen speaks during a virtual roundtable with participants from Black Chambers of Commerce across the country to discuss the American Rescue Plan, Friday, February 5, 2021, at the Southern Court Auditorium in comp. From the White House ((AP Photo / Jacquelyn Martin))
The multi-part project could cost up to $ 3 trillion, according to The Wall Street Journal, and would be the basis for Biden’s “Build Back Better” plan, a comprehensive infrastructure and job measure that would include policies to combat climate change, as well as ways to revitalize the manufacturing industry and renovate housing, education and health. (Yellen said on Tuesday that the proposal will have “sustainable infrastructure” and “will create green jobs”).
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“I think a package that consists of investments in people, investments in infrastructure, will help create good jobs in the American economy,” said Yellen. “Changes in the tax structure will help pay for these programs.”
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Still, top Republicans are already refusing the prospect of raising taxes, with Senate minority leader Mitch McConnell saying last week that there will be no bipartisan support for such a move. The Chamber of Commerce also raised concerns about raising the corporate tax rate, warning that this “would make the United States a less attractive place to invest profits and locate corporate headquarters”.
Yellen defended the government’s expected pressure for tax increases, saying Biden will not “propose policies that harm small businesses or Americans”.
“A long-term plan that addresses the economy would likely be accompanied by some revenue generators,” she said. “We need to increase revenues fairly to sustain the spending that this economy needs to be productive and competitive.”