The Biden Infrastructure Plan: Where Do We Go From Here?

On March 31, the Biden Administration released its much-anticipated American Jobs Plan (the “AJP”), which outlines $2.3 trillion of proposed spending on not only traditional infrastructure programs, but also climate change, housing, drinking water, workforce development, manufacturing, telecommunications, and elderly care measures.  It also includes a substantial increase in corporate taxes to pay for the proposal. The AJP sets the stage for what is expected to be a robust debate between the Biden Administration and Congress and within Congress on the details of the legislation to implement the AJP.

It is important to understand what the AJP is and is not.  First, the AJP is a policy proposal that sets forth the administration’s policy and spending priorities.  The AJP is not, however, a legislative proposal (in other words, there is no proposed legislative language) and does not lay out specific policy details.  The details will be contained in the legislative text once it is released, likely when Congress returns from recess.

Second, it is important to understand that the $2.3 trillion proposed in the AJP is to be phased in over the course of eight years and is spread across both traditional transportation infrastructure (roads, bridges, mass transit, airports, waterways, and railroads) and many other areas of infrastructure (including housing, broadband, drinking water, and energy).  Therefore, while the proposed level of infrastructure spending is significant, the time horizon and the spending across what is a very broadly defined scope of infrastructure should be kept in perspective. 

Transportation Infrastructure Assets and Priorities: What Are the Spending Highlights?

The AJP’s infrastructure proposals include spending of approximately $621 billion over the next decade on a wide range of physical assets and transportation-related incentives, with a focus on safety, reliability, and resiliency, including the following:

What Other Policy Proposals and Investments Are Included?

The AJP also includes nearly $1.4 trillion in spending for clean water infrastructure, digital and broadband infrastructure, power infrastructure, modernization of schools and early learning facilities, affordable housing resources, and veterans hospitals. Additionally, the AJP calls for funding increases in research and development infrastructure, climate research initiatives, improvements to American industrial capacity for critical goods, innovation hubs and community revitalization, and worker training programs and for increased access to capital for domestic manufacturers. It also includes $400 billion, 20% of the total, to support increased availability of home care for elderly and disabled people. 

How Is the AJP Paid For?

The AJP includes a variety of corporate tax changes that would raise over $15 trillion over 15 years and that the Biden Administration asserts would more than pay for the spending included in the AJP. These are to:

• Increase the corporate tax from 21% to 28%;
• Increase the tax on foreign sourced income to 21%, calculate tax based on a country-by-country basis and eliminate allowance for foreign assets;
• Impose a 15% minimum tax on large corporations’ book income;
• Eliminate tax incentives for foreign-derived intangible income (FDII);
• Create new regulations to prevent corporate inversions;
• Eliminate tax preferences for fossil fuels; and
• Increase funding for the Internal Revenue Service to increase tax audits of corporations and otherwise prevent corporate tax evasion. 

What Opportunities Will There Be for Private Investment in Infrastructure? 

The AJP includes few details about policies related to infrastructure investment, including with respect to private investment.  Legislation implementing components of the AJP could include language that could help facilitate increased private investment in infrastructure, which would increase the overall amount of infrastructure investment through the AJP.  These proposals include:

• Infrastructure investment incentive grants providing federal grants in connection with infrastructure concessions implemented by state and local governments where proceeds of those concessions are reinvested in infrastructure;
• Increasing or eliminating the current $15 billion cap on surface transportation private activity bonds (which Chairman Richard Neal of the House Ways & Means Committee has said he plans to include);
• Implementing private activity bond authority for social infrastructure projects;
• Expanding the federal TIFIA and RRIF financing programs and implementing similar low-interest financing programs in other areas of infrastructure (for example, related to resiliency, infrastructure equity, airport infrastructure, social infrastructure, and broadband development); and
• Making changes to facilitate the use of private activity bonds and TIFIA financing and the maintenance of tax-exempt debt related to existing infrastructure assets concessions where proceeds are reinvested in infrastructure.

Where Do We Go From Here?

The release of the AJP is just the beginning of the legislative process to pass one or more bills in Congress to implement the plan.  While the AJP was presented as a single plan, its enactment into law will likely occur in pieces.  Many of the spending provisions will be collected into a single bill that will be passed using reconciliation procedures, which permit certain spending and taxing legislation to be passed without being subject to the Senate’s filibuster. However, a separate bill will still likely be needed to reauthorize surface transportation programs, which expire on September 30, and other programmatic reforms, which are not eligible for inclusion on reconciliation legislation. The Senate Parliamentarian decides which provisions can be included in reconciliation. 

The Senate Parliamentarian recently ruled that Senate Democrats could use the budget reconciliation process for a second time to move President Biden’s infrastructure plan forward as they did with his COVID-19 relief package earlier this year.  Under budget reconciliation procedures, Senate Democrats could advance infrastructure legislation with only 50 votes, as opposed to 60 votes, which is the threshold for passage for most bills in the Senate.  To pass President Biden’s infrastructure bill using budget reconciliation, however, all 50 Senate Democrats will need to be in complete agreement on any legislative text.  Right now, at least one Senate Democrat has expressed concern over Biden’s proposal to pay for the plan with an increase in the corporate tax rate.  For this reason, and to help ensure passage, we expect congressional leaders to modify Biden’s ambitious infrastructure plan as it works its way through Congress over the coming weeks.  

What Is the Time Frame?

Speaker Pelosi has indicated that she would like the House of Representatives to pass infrastructure legislature by July 4, but the enactment of the AJP is unlikely to occur before Congress’s August recess and more likely to happen in the Fall.