Opinion

WILFORD: Democrats Appear To Be Confused About What Infrastructure Is

(screenshot, White House YouTube)

Andrew Wilford National Taxpayers' Union Foundation
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When President Biden released his plan for a $2 trillion infrastructure package, some noted the relative dearth of provisions that actually affected infrastructure — just under 7 percent of the bill’s $2 trillion in funding goes towards roads and bridges. Now, Democrats appear to be seeing how completely they can rewrite the English language, trying to redefine traditional progressive hobby horses as “infrastructure.”

Recently, Democratic New York Sen. Kirsten Gillibrand tweeted that paid leave, childcare, and caregiving are all “infrastructure.” She later doubled down on this claim, citing a poll that says little more than that Americans support receiving all these things affordably.

Absurd as this claim is, it serves as a warning that, before all is said and done, there will almost certainly be an effort to tuck yet more progressive wish-list items into the infrastructure bill. Democrats have gotten used to the idea that they can use legislative packages ostensibly aiming to solve a single issue, such as the recent COVID relief bill, to tack on whatever else they desire.

Unfortunately, all these “add-ons” don’t come free to you, the taxpayer. Democrats have tried to deflect the attention from these costs by framing them as corporate tax increases. But corporate tax increases generally don’t get paid by corporations — they get paid by American workers and consumers.

Because higher corporate tax rates reduce corporations’ ability to invest, wage growth often suffers. The Tax Foundation estimates that 70 percent or more of the cost of corporate tax increases are borne by labor through the form of lower wages.

At the same time, workers can suffer in other ways. The corporate tax changes in Biden’s infrastructure plan would undo efforts from the 2017 tax reform law to make the U.S. tax code more competitive internationally and encourage companies to headquarter here in America, encouraging further shifting of jobs, profits, and investment overseas.

Not only would a 32.8 percent corporate tax rate (when accounting for state and local corporate taxes) represent the highest rate in the industrialized world, Biden’s plan to pay for his “infrastructure” bill would also make the U.S. would also stand out in a bad way internationally by moving back towards a “worldwide” tax system. By attempting to tax American multinationals’ overseas profits, something most other industrialized countries do not do, Biden would only encourage them to shift their operations overseas.

Democrats have highlighted support for their corporate tax increases from business leaders, like Amazon and Lyft, but backing from these companies doesn’t tell the story it might appear to at first glance. Amazon, for example, might benefit more in dollar terms from the ability to write off its significant research and development costs than it does from low corporate tax rates, which could mean it has different priorities than other big companies. Lyft, meanwhile, has thus far failed to generate a profit in the first place, which makes the corporate tax rate essentially irrelevant to its current finances.

Taxpayers shouldn’t be fooled by this misdirection. Corporate taxes hurt American workers directly, and the tax mechanisms being proposed in Biden’s legislation would be best avoided even if the funding was being used in the best possible way. Unfortunately, its contents can be called “infrastructure” as much as politicians’ statements can be called truthful and accurate: rarely.

Andrew Wilford is a policy analyst with the National Taxpayers Union Foundation, a nonprofit dedicated to tax policy research and education at all levels of government.