Economic Growth and Infrastructure – The Real Estate Roundtable

The White House - roses

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)

What’s Next:

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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Oval Office Infrastructure meeting Biden Buttigieg others

President Biden will unveil an ambitious economic growth plan on March 31 that may cost up to $4 trillion to fund his administration’s wide-ranging goals on infrastructure, climate and domestic policies. (Reuters, March 24 and Bloomberg News, March 25)

The administration’s legislative effort may be split into two parts – an initial package that funds transportation projects with a focus on climate change, and a second that addresses domestic priorities such as universal prekindergarten, national childcare and free community college tuition. (Wall Street Journal and Washington Post, March 22, New York Times March 25)
Congressional Democrats are working on a filibuster-proof fiscal 2022 reconciliation bill to advance President Biden’s economic recovery plan, along with a five-year surface transportation reauthorization. Funding for the current surface transportation bill expires Sept. 30. (Law360, March 22)
Axios reported on March 23, the White House is considering using the budget reconciliation process two more times this year, after using it to pass the recent $1.9 trillion pandemic relief package without any Republican support. Enacting three separate reconciliation packages would be unprecedented, and require a ruling from the Senate parliamentarian that proposed legislation is eligible for reconciliation under the Congressional Budget Act of 1974.

Focus on Gateway Project:

Gateway Project map

The “Gateway” rail tunnel project between New York City and New Jersey is a high priority for the Biden administration that is being treated with a “sense of urgency,” according to Transportation Secretary Pete Buttigieg, who testified March 25 before the House Transportation and Infrastructure Committee. (BGov, March 25)
“This is a regional issue, but one of national significance because if there were a failure in one of those tunnels, the entire U.S. economy would feel it,” Buttigieg said. He added that federal and state officials are working “to develop the next administrative draft of the environmental impact statement, which is a big part of what needs to be completed in order to get there.”
Buttigieg also acknowledged that funding the administration’s infrastructure transportation goals must look to other revenue sources than borrowing. “There is a simple set of places we can look: user fees, general fund or other tax sources as Congress has done to fill gaps in Highway Trust Fund in recent years or borrowing,” Buttigieg testified.

How to Pay:

Yellen and Powell remote testimony

Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell testified jointly this week before House and Senate committees on economic conditions and pandemic relief. (Wall Street Journal, March 23)
Yellen testified before the House Financial Services Committee on March 23 that future taxes are needed to fund infrastructure programs. “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 added, “We do need to raise revenues in a fair way to support the spending that this economy needs to be competitive and productive.” (Financial Times, March 23)
Chairman Powell responded to a concern from House Committee Member Blaine Luetkemeyer (R-MO) that Fed data indicates 51 percent of current commercial real estate debt is held by banks and that community banks have a higher concentration of these loans. Powell stated, “We’re monitoring CRE very carefully. Its concentrations arise principally in smaller banks, and we’ll have to monitor it carefully as we allow moratoriums to elapse. We’re well aware of the issue and we’ll be sure to move very, very carefully when we do address that.”
The two regulators also testified before the Senate Banking Committee on March 24. Treasury Secretary Yellen stated that the federal government can afford to invest trillions, despite the national debt. “My views on the amount of fiscal space that the United States, I would say, have changed somewhat since 2017. Interest payments on that debt relative to GDP have not gone up at all, and so I think that’s a more meaningful metric of the burden of the debt on society and on the federal finances,” Yellen said. (The Hill, March 24)

Taxes & CRE:

A March 25 BisNow webinar on Tax Policy and the Impact on CRE featured Roundtable Senior Vice President and Tax Counsel Ryan McCormick, bottom left in photo. The webinar focused on the outlook for real estate tax policy in 2021, with an emphasis on like-kind exchanges and opportunity zones.
Other participants included Ja’Ron Smith, former Deputy Assistant to President Trump; Capital Square Founder and CEO Louis Rogers; and David Franasiak, Principal at Williams & Jensen. (Watch Video)

Congress leaves Washington today for a two-week recess. “When the Senate returns to session, our agenda will be no less ambitious than it was over the past few months,” Senate Majority Leader Chuck Schumer (D-NY) said yesterday. (The Hill, March 25 and New York Times, March 26)

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Category: Economic Growth and Infrastructure

Biden Administration Details Tax Proposals to Fund Infrastructure Package

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