President Joe Biden’s $2 trillion infrastructure plan would invest $621 billion in transportation infrastructure and would be paid for through an increase in the corporate tax rate, among other measures.
Biden released the American Jobs Plan Wednesday morning as lawmakers are beginning efforts to legislate an infrastructure package in the coming months. To pay for portions of the plan, Biden proposed a Made in America Tax Plan to set the corporate tax rate at 28% from 21%.
This is the first of two bills, with the second focusing on free access to community colleges, universal pre-Kindergarten and others. Municipal bond provisions were not mentioned in Biden’s plan, but stakeholders expect those details to be hashed out in Congress and most expect there to be a protracted battle between the two parties on how to pay for all the provisions.
“We weren’t expecting a lot of financing details to be released in this draft and that was confirmed today,” said Brett Bolton, vice president of federal legislative and regulatory policy at Bond Dealers of America. “What we’re looking for is our friends on Capitol Hill to take up that mantle and really start pursuing financing options which include a robust effort to include municipal bond market priorities.”
How the bill or bills make it through Congress is also uncertain. Republicans have been against raising taxes and Democrats want a massive new infrastructure package that requires it.
The possibility of a reconciliation bill still looms.
Reconciliation is a tool that allows lawmakers to conform tax and spending levels to the levels set in a budget resolution. It can only be used twice this year and was already used to pass COVID relief this month.
The increase to the corporate tax rate to 28% from 21% — the rate set by the Tax Cuts and Jobs Act of 2017 — like any tax increase will face pushback from Republicans.
And this week,
In a divided Congress, that could stall legislation.
However, key players in the House and administration have been vocal about their support for municipal bond provisions.
House Ways and Means Committee Chair Richard Neal, D-Mass., told BDA that he plans to pass an infrastructure package out of his committee by late spring or early summer.
Neal also reiterated his support for specific municipal bond provisions such as tax-exempt advance refundings, expansion of PABs, the reinstatement of direct-pay bonds that would be exempt from sequestration, and increasing the cap for small borrowers for the amount of tax-exempt bonds they can issue in a year and still remain eligible to sell them to banks under a favorable bank-qualified status.
U.S. Transportation Secretary Pete Buttigieg has said many municipal bond provisions show promise, such as increasing the federal cap on private activity bonds, bringing back a direct-pay bond as well as reinstating tax-exempt advance refunding.
“Having leadership like that in the administration, working with leaders on the Hill, really helped point them in the right direction and really reassured that bonds will receive a fair shot in deliberations in the next coming months,” Bolton said.
House Transportation and Infrastructure Committee Chair Peter DeFazio, D-Ore., supported Biden’s plan.
“In announcing this plan, President Biden has taken the conversations that I’ve had with him, Vice President Harris, and Secretary Buttigieg, and he’s put those words into action,” DeFazio said. “The American Jobs Plan will not only make bold, transformational investments in our nation’s transportation and infrastructure, it will do so with an emphasis on creating good-paying jobs, supporting American manufacturing, investing in rural and urban communities alike, and addressing the greatest challenge of our time, the climate crisis.”
“I’m intrigued to see how the Hill responds and I’m assuming they’ll turn to the financing portion of this soon,” Bolton added.
The National Association of State Treasurers wants to discuss financing tools to support Biden’s infrastructure plans with the Administration and Congress.
“We remain particularly focused on efforts to reinstate tax-exempt advance refunding bonds as part of any infrastructure package moving forward,” said Shaun Snyder, NAST executive director.
Among the details in the plan, it would modernize 20,000 miles of highways, roads and streets, repairing thousands of smaller bridges along the way. Biden also wants to replace thousands of buses and rail cars, renew airports and expand transit and rail into new communities. Biden proposed an increase of $115 billion to modernize highways, streets and bridges.
Biden’s plan also calls on Congress to invest $85 billion to modernize existing transit to meet rider demand.
“This investment will double federal funding for public transit, spend down the repair backlog, and bring bus, bus rapid transit, and rail service to communities and neighborhoods across the country,” they wrote.
Congress should also invest $25 billion in airports, including funding for the Airport Improvement Program, or AIP, the Biden administration said, as well as invest $17 billion in inland waterways, coastal ports, land ports of entry and ferries.
The American Association of Port Authorities supported Biden’s plan.
“Investment in port infrastructure supports the growth of opportunity throughout the national economy and ensure continued global competitiveness,” AAPA said. “America’s ports look forward to working with President Biden and bipartisan leaders in Congress to advance significant investments in our nation’s infrastructure.
Airports Council International noted airports have been underfunded, adding that it has created a backlog of $115 billion of projects.
“As we taxi towards brighter days ahead America’s airports are ready to take off,” said Kevin Burke, ACI-NA president and CEO. “These much needed funds will help U.S. airports build back and create jobs that will support a vibrant 21st century economy.”
Drinking water was another focal point of Biden’s outline with a plan to eliminate all lead pipes and service lines which can be paid for through investing $45 billion in the Environmental Protection Agency’s Drinking Water State Revolving Fund and in Water Infrastructure Improvements for the Nation Act.
State revolving funds act as infrastructure banks by providing low-interest loans for water infrastructure projects. As money is paid back into the state’s revolving loan fund, the state makes new loans for other projects. These recycled payments of loan principal and interest earnings allow the state’s fund to “revolve” over time.
Biden wants to invest $100 billion to upgrade and build new public schools, through direct grants and $50 billion leveraged through bonds.
The Government Finance Officers Association was encouraged that Biden’s proposal seeks investment in transit, water and broadband.
“We recognize the process of turning this proposal into legislative text still needs to happen so we hope that as that effort begins, our federal partners acknowledge the importance of protecting tax-exempt municipal bonds given this is a tool with a long history in infrastructure investment,” said Michael Belarmino, GFOA’s senior policy advisor.
Biden will talk more about his plan later Wednesday at an event in Pittsburgh. “The President looks forward to working with Congress, and will be putting forward additional ideas in the coming weeks for reforming our tax code so that it rewards work and not wealth, and makes sure the highest income individuals pay their fair share,” his administration wrote.
