Treasury Secretary Janet Yellen on Tuesday defended President Biden’s expected push to raise taxes for corporations and high-earning individuals to help fund a massive infrastructure spending package as the economy recovers from COVID-19.
During an appearance before the House Financial Services Committee, Yellen said it’s essential for the U.S. “to raise revenues in a fair way to support the spending that this economy needs to be competitive and productive.”
“A package that consists of investments in people, investments in infrastructure will help to create good jobs in the American economy and changes to the tax structure will help to pay for those programs,” she told lawmakers.
Biden is planning to propose roughly $3 trillion in spending focused on revamping U.S. infrastructure, creating more domestic manufacturing jobs, adapting the U.S. to climate-related risks and expanding education and job training. The proposal will likely be paired with increases to the corporate income tax rate, the top individual income tax rate and taxes on capital gains.
While Democrats are eager to make a massive investment in the U.S. economy, Republicans have fiercely criticized them for pursuing trillions more in spending after just passing a $1.9 trillion COVID-19 relief bill along partisan lines. GOP lawmakers also argue that raising taxes as the economy works to rebound from the pandemic will disrupt the recovery.
“We know that raising the corporate tax rate results in higher costs for small businesses, schools and American households,” said. Rep. Ann Wagner (R-Mo.).
“Then why, as this country begins to reopen and recover economically, would the Biden administration be proposing tax policy which would in the end hurt the American family and millions of struggling small businesses?” she continued.
Yellen countered that the impact of corporate tax hikes on consumer prices is unclear despite extensive economic research, and insisted that Biden’s proposal would help households by boosting the U.S. labor force and productivity.
“This administration is not going to propose policies that hurt small businesses or Americans,” she said. “The administration is going to propose investments this economy has long needed to be competitive and productive.”
Poor U.S. infrastructure has long been cited by analysts as a drag on the American economy and impediment to faster growth. There is also growing bipartisan interest in building a competitive edge against China in manufacturing crucial technologies with national security implications, such as semiconductors.
Even so, Biden and Democrats are unlikely to find much — if any — support from Republicans for their proposal and are expected to use budget reconciliation to pass the measure with just 51 votes in the Senate. Under this process, Biden could not afford a single defection from a Senate Democrat.