According to reports, the Biden government is planning new tax legislation to fund the next round of economic initiatives, which could be paid for by increasing the corporate and individual tax rates for high earners. The proposed bill would likely fund infrastructure improvements, climate protection projects and support for those on lower incomes, following the initiatives announced by Biden during his campaign to pay their fair share. The details and effective dates of these tax changes are yet to be announced and are likely to be the subject of intense debate and negotiation.
While Democrats are likely to seek bipartisan support for the legislative package, rumors suggest that some are willing to pursue a party-led bill using the budget reconciliation package used for the recent COVID-19 stimulus. Republicans and Democrats have long sought to work together on an infrastructure package to improve roads, bridges and rails while modernizing clean water mechanisms, expanding broadband access in both rural and urban environments, and upgrading key components for electric vehicles. However, increasing corporate and individual tax rates as payment may make the proposal unfeasible for the majority of Republicans, even though the proposal would not include more progressive measures like Senator Elizabeth Warren’s (D-MA-backed wealth tax). Also, regardless of Republican support, the Democrats must keep their entire caucus in the Senate, a group of just 50, to even pass bills on a party-political basis. Moderate Democrats like Senator Joe Manchin (D-WV) could easily be tricked into opposing the legislation, especially if it favors green energy to the detriment of fossil fuels like coal, a traditional source of jobs in his home state.
The Biden Administration recently announced the appointment of Lily Batchelder as the next Assistant Secretary (Tax Policy) in the Treasury Department. Once approved, she will serve as the chief tax officer in the finance department and will be an integral part of the implementation of any new tax law. Ms. Batchelder’s priorities align well with the political initiatives discussed by the Biden administration. Ms. Batchelder is currently a professor at the NYU School of Law where her main areas of research and teaching are federal domestic tax issues such as federal income taxes, property transfer taxes, and social security. Ms. Batchelder previously served on the Biden Administration’s Treasury Transition Team as Assistant Director of the White House Economic Advisor and Majority Chief Counsel for the Senate Finance Committee.