March saw the American Rescue Plan’s passage, designed to accelerate vaccine development and administration, stabilize state/local governments, extend federal unemployment insurance benefits, and provide additional direct payments to individuals and families. Following the Rescue Plan, the Biden Administration and Democrat congressional leaders have turned their attention to a broad, $2.2+ trillion economic recovery package, the American Jobs Plan, which strives to implement the ‘Build Back Better’ campaign pledge from Joe Biden.
A significant part of that agenda is investing in America’s Infrastructure with a big ‘I’ as it goes beyond roads and bridges and includes funding for ports, airports, rail, public transportation, schools, water systems, and next-generation industries like electric vehicles. There has been bipartisan and corporate support for investments like these for many years. The failing infrastructure around the country has impacted furniture retailers as trucks get delayed and damaged using roads in disrepair. Currently, the extreme supply chain disruptions necessitate federal funding to expand terminals and create opportunities to move goods swiftly.
Throughout the early days of this Administration, there has been a pledge to ‘pay for’ these longer-term investments. However, the American Rescue Plan was never considered in the same context as it was more of an ‘emergency’ effort. While Republicans and Democrats can agree that investing in infrastructure is overdue, the division on this plan specifically, and previous efforts, has been how to pay for it all.
President Biden has proposed to raise the corporate tax rate from its current level of 21% (set by the 2017 Tax Cuts and Jobs Act) to 28%. That change would provide about $700+ billion in additional revenues to the U.S. Treasury. The Administration has also proposed to raise the top income tax bracket rate back to 39.6%. It was lowered by the Tax Cuts and Jobs Act in 2017 as well. Not all the details are released quite yet as the Administration has been vague about whether the individual tax rate increase would apply to individuals OR families earning more than $400,000 per year. This focus on raising taxes has led Republicans to abandon this infrastructure plan and Democrats exploring using the ‘reconciliation’ process once again to pass the package through Congress with only Democrat votes.
There has also been a national dialogue/debate for 20+ years about raising the federal gas tax, which has not been adjusted since 1993. Politically, this has been impossible because this tax is levied at the pump, so all Americans will realize a tax increase each time they fill up their gas tank. Practically, the gas tax is a regressive measure as cars have become more fuel-efficient, and people are using other modes like public transportation to commute. That has left multiple Administrations and Congresses searching for other ‘funding’ mechanisms but raising revenue/taxes will always be politically challenging.
The American Jobs Plan aims to rebuild the U.S. economy from the devastating impacts of COVID-19. Transitioning millions of Americans from unemployment back to the labor market will take several years, but the national infrastructure is an obvious vehicle to create those jobs. A strong and stable economy is vital for the furniture industry moving forward – demand has reached historically high levels during this pandemic. A strong labor market will help further home buying and home furnishings needs for years to come.
