Potential Tax Changes in the American Jobs Plan

April 15, 2021

On Wednesday March 31, 2021, the Biden administration unveiled its new infrastructure package. Included within the package are a few of the major tax changes Biden addressed during the election but not all. It is important to note this is merely the plan laid out by the White House that outlines where the roughly $2 trillion will be spent and some ways he intends to pay for those changes over the next years under the package as presented by the president. There are many things left to be decided and discussed in Washington and what is being addressed by the White House is sure to be changed, tweaked, edited, and altered many times over as it makes its way through congress. We can surely expect that if a bill makes it to the president’s desk, the bill he signs will be very different from the current package but looking at what is currently being proposed may help to plan for what may get passed if anything.

As stated above, this new infrastructure package is expected to cost in the trillions of dollars. With the previous stimulus package recently passed, there are concerns in Washington over how the government might pay for the massive infrastructure plan as laid out. With the formal proposal from the White House, we now have a clearer picture and can explore what we may expect as a bill is drafted and makes its way through the legislative process. While the president has previously discussed a variety of tax law changes that he would like to implement, only a couple of them were included within the proposal put forth in the infrastructure package. The major change is related to the corporate tax rate.

Biden’s administration is wanting to increase the corporate tax rate. Under the Trump administration’s tax changes, the corporate tax rate fell from 35 percent to 21 percent starting in 2018. Biden is wanting to increase the current tax rate up to 28 percent potentially starting in 2022. Along with the corporate rate increase, the administration is wanting to place a minimum tax on book income for large companies. The proposed minimum tax of 15 percent would be placed on the financial income of corporations reporting more than $100 million in book income.

In addition to the changes to corporate taxation on domestic companies, another large area the current administration wants to address would be large U.S. multinational corporation where profits are currently being shifted offshore along with jobs. This was addressed in the previous administration’s tax reform and some of the new package appears to want to expand on what has been done, remove what it sees as ineffective or a tax shield and increase the tax rate on already imposed taxes. The current administration is attempting to close what it perceives as loopholes and some incentives given to these global multinational corporations. The president’s proposal will also try and bring jobs back to the U.S. by attempting to limit expenses for companies that come from offshoring jobs.

The proposal is sure to be extensive and there will be alterations and adjustments from now to when it gets put into a bill and from that bill to what if anything gets passed. With such a large cost to the U.S. finding ways to pay for it whether that includes what was included in the package or other items such as increases to individual tax rates, estate tax changes, or elimination of other perceived loopholes. It is still a long road ahead but keeping an eye on what is being said and changed is important.

We here at Chapman, Hext are going to continue to follow this topic and provide information as things change. If you have any questions about the current administrations proposed infrastructure Policy changes, or if require any other assistance with your tax planning and/or compliance needs, please do not hesitate to contact one of our knowledgeable team members.

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