Biden Administration Details Tax Proposals to Fund Infrastructure Package
The Biden administration this week released additional details on its proposals to raise corporate taxes to pay for its massive $2.3 trillion economic growth and infrastructure proposal.
Infrastructure & Taxes
- President Biden, anticipating Congress’ return next week to begin deliberations on his proposal, stated, “Debate is welcome. Compromise is inevitable. Changes are certain. Inaction simply is not an option.” (White House remarks, April 7)
- The administration aims to raise $2.5 trillion to pay for its sprawling “American Jobs Plan” by increasing the corporate tax rate to 28 percent from 21 percent, imposing a strict new minimum tax on global profits, and eliminating incentives to shift profits overseas. (New York Times, April 7)
- The proposed taxes to fund the infrastructure investments were detailed this week in a Wall Street Journal op-ed by Treasury Secretary Janet Yellen – “A Better Corporate Tax for America” – and in Treasury’s report, “The Made in American Tax Plan.”
- According to an April 8 Wall Street Journal report, the infrastructure proposal includes at least $5 billion for an affordable-housing grant program that would encourage local jurisdictions to relax zoning rules and restrictions on new construction. The new competitive grants for cities and localities would seek to eliminate exclusionary zoning policies such as minimum lot sizes, mandatory parking requirements and density restrictions.
- The Journal article quotes a recent Urban Institute brief: “There are so many decisions made at the local level that can impede the development of affordable housing that federal policy makers should push communities to reorganize their approach to development from the ground up.”
- The Roundtable has long encouraged federal agencies to leverage economic development and infrastructure funds to discourage exclusionary zoning tactics. Bills such as the Yes in My Backyard Act and the Build More Housing Near Mass Transit Act would require state and local governments to plan for and encourage high-density and multifamily development when they seek grants from US-HUD and US-DOT. (Roundtable Weekly, March 6, 2020 and February 28, 2020)
- Democrats are weighing whether to advance the Biden infrastructure plan under the same “reconciliation” budget process that was used to pass the March $1.9 trillion pandemic relief package by a simple majority vote – thereby bypassing the 60-vote requirement typically needed to advance most legislation in the 50-50 Senate.
- Senate Parliamentarian Elizabeth MacDonough this week issued an opinion that may allow Democrats to pass additional, large-scale bills with no Republican support before the midterm elections. The sparse April 5 ruling, according to a Democratic spokesperson, has “some parameters [that] still need to be worked out.” The ruling does not specify the types of reconciliation bills that could be considered or how many times the maneuver would be allowed. (Politico, April 7 and CQ News, April 8)
- House Speaker Nancy Pelosi (D-CA) yesterday said, “If [Democrats] have to go to reconciliation, that’s a lever, but I hope it’s not something that we need to do.” (Roll Call, April 8)
- Pelosi added that the House could pass the infrastructure package by the July 4 recess, followed by the Senate before the August recess. (Bloomberg, April 8)
Pelosi also said she expects the White House in the coming months to introduce a separate, multi-trillion “American Families Plan” focused on expanded family support benefits, including child care and health measures. That plan could be pared with significant changes to individual taxes, including capital gains.
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Roundtable Comments on “Model” Local Ordinance Proposing Efficiency and Emissions Requirements on Buildings
The Real Estate Roundtable submitted comments on April 6 regarding a “model” law developed for cities, counties, and states considering building “performance standards” for energy consumption and GHG emissions.
Building Performance Standards (BPS):
- The model ordinance has been developed by the Institute for Market Transformation (IMT) – a D.C.-based policy organization that coordinates with state and local bodies on energy- and climate-related regulations. (IMT’s model ordinance, BPS resources, and blog post, Creating Real-Estate Friendly Building Performance Standards, Jan 21, 2021)
- A task force of The Roundtable’s Sustainability Policy Advisory Committee (SPAC) convened to respond to IMT’s proposed law. According to the letter, a “whole-of-economy approach must drive businesses to take bolder actions within their control to minimize their carbon footprints while operating profitably, meeting investors’ demands, and equitably creating jobs in their communities.”
- “Real estate developers, owners, managers, and financiers – along with building tenants, occupants, public buildings, and … the power supply, transportation, and manufacturing sectors – all have shared obligations to address climate change,” The Roundtable writes.
Roundtable Comments -- Talking Points:
- BPS laws must rely on consistent standards, methods, and data that reflect the best available government and industry practices. Uniformity is critical to avoid a divergent “patchwork” of state and local laws that would unduly complicate building owners’ compliance and regulators’ enforcement.
- No BPS law should mandate building owners to reduce emissions from sources beyond their control. Owners should not be saddled with responsibilities to “clean-up” the electric grid, district thermal systems, and other community-wide power infrastructure that they do not manage or control.
- Any BPS law should include financial assistance to help all regulated owners defray the significant capital expenses needed to bring buildings into compliance.
- BPS laws should encourage investments in existing buildings and allocate compliance burdens based on tenants’ and occupants’ energy usage.
- The least efficient buildings and communities are frequently the most distressed buildings and communities. Added regulatory costs from BPS mandates could disproportionately affect housing affordability and economically distressed neighborhoods on the “frontlines” of climate change.
Why It Matters:
- “RER members must engage vigorously on climate and energy issues,” said SPAC Chair Anthony E. Malkin, above left, (Chairman, President and CEO, Empire State Realty Trust). “We have the facts, the practice, and the experience to inform the thinking of cities, states, federal officials, and NGOs as they develop goals to reduce greenhouse gas emissions and stride toward a clean energy economy. The field on which the game is played, and the rules themselves, are in constant flux. RER member engagement has never been more important to offer policy recommendations that create green jobs while modernizing U.S. buildings and power infrastructure.”
- “It is critical for Roundtable members to have a seat at the table as cities and states consider laws that set efficiency and emissions standards on buildings,” said SPAC Vice Chair, Daniel Egan, above right, (Senior Vice President, Vornado Realty Trust). “Policy makers must design climate programs that encourage owners to invest in their buildings to improve performance, while incentivizing our industry with market-based solutions that can help increase the nation’s supply of clean, renewable energy.”
State and local jurisdictions have been marching forward with regulatory mandates on buildings to address energy and GHG emissions, which prompted The Roundtable to comment on IMT’s model ordinance. While Democrats in the House of Representatives have offered omnibus climate legislation with provisions that would affect U.S. real estate (see the CLEAN Future Act, H.R. 1512), it faces an uphill battle in the Senate. (Roundtable Weekly, March 5)
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Administration Outlines FY 2022 Budget, Plans Executive Order on Climate-Related Risks for Public and Private Financial Assets
The Biden administration today released its $1.52 trillion discretionary spending request for the coming fiscal year, which starts Oct. 1, 2022. This initial budget request outlines President Biden’s priorities and agenda for the coming year, but does not include any plans for raising revenue or tax policy changes. (Full budget text and news release summary)
Tax Details in Spring
- Today’s “skinny” budget will be followed in late spring by a formal budget with more detailed requests for mandatory spending and tax policy proposals. (CQ, April 7)
- The budget proposal would boost current funding levels for nondefense spending by 16 percent and limit increases in defense spending to 1.7 percent. (CQ, April 9)
- Among the specific agencies affected, the Environmental Protection Agency budget would increase $2 billion, and the Housing and Urban Development Department would receive a $9 billion boost. (New York Times and USA Today, April 9 )
Budget & Climate
- The administration’s is also expected to address risks to financial stability posed by climate change in its long-term budget planning. Bloomberg reported this week that Biden will soon issue an Executive Order to develop a plan on climate-related risks for public and private financial assets.
- The Executive Order would come as policymakers and the private sector debate how the financial industry should prepare for environmental threats – and the information companies should provide to investors about those risks.
- The strategy would be developed within 120 days of the Order by National Economic Council Director Brian Deese and National Climate Advisor Gina McCarthy, in coordination with Treasury Secretary Janet Yellen. (Bloomberg, April 8)
Secretary Yellen is currently working on a separate report on government-wide efforts to address climate-related financial risks with the Financial Stability Oversight Council, which includes the Federal Reserve and the Securities and Exchange Commission. (Politico, March 31)
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