Buttigieg defends Biden’s multi-trillion infrastructure scheme

US transportation secretary Pete Buttigieg defended the Biden administration's plan to use changes to the corporate tax system to fund a multi-trillion infrastructure scheme, as he claimed America was "falling behind" other countries in its infrastructure standards.

Appearing in the White House press briefing room for the first time since becoming a member of the Biden cabinet, Mr Buttigieg said now was the "best time in our lifetimes to make a generational investment in infrastructure".

The former mayor of South Bend, Indiana, who ran against Mr Biden for the Democratic nomination for president before endorsing him last March, said the US now ranked 13th place in the world for infrastructure. He claimed the new infrastructure plan would create "millions of good jobs for communities across the country".

Last week, Mr Biden unveiled a proposed $2 trillion (€1.68 trillion) infrastructure spending package – the first part of a multi-trillion spending plan he intends to unveil later this year. The proposal envisages billions of dollars of spending on traditional infrastructure like roads and bridges, as well as investments in water, green energy and broadband, leading to accusations from some Republicans that his definition of “infrastructure” is too broad. The proposal will need congressional support – a tough sell given the Democrats’ effective majority of one in the US Senate.

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Effect on Ireland

Following on from his infrastructure announcement, Mr Biden unveiled this week a new tax plan which he says will fund the $2 trillion spending package. The proposal aims to reverse the corporate tax cuts introduced by his predecessor, Donald Trump, by increasing the corporate tax rate to 28 per cent. In addition, Mr Biden and treasury secretary Janet Yellen are proposing a minimum global tax rate for multinationals to address the issue of profit-shifting by US companies – a proposal that could negatively affect Ireland's investment model.

The Republic's low corporate tax rate and status as an attractive destination for US multinationals has been cited extensively in various US media outlets this week. On Friday, the White House circulated an article by the Nobel prize-winning economist Paul Krugman in the New York Times denouncing what he describes as Ireland's "leprechaun economics".

Asked if he believed there were other ways of funding the infrastructure plan apart from corporate tax changes, Mr Buttigieg said it was “pretty hard to beat” Mr Biden’s suggestion that changes to corporate tax should fund the spending, even as he conceded that negotiations were only at an early stage and could be open to change.

“The jobs plan envisions this being covered through corporate taxes and the president believes very strongly that this is not something that should burden ordinary American families at a time when so many corporations have paid literally zero,” he said, adding: “There is ample evidence that American corporates can be competitive at a tax rate like 28 per cent.”

Pointing to China’s rapid progress in developing infrastructure and manufacturing goods, he said there was a danger of America “falling behind”.

Earlier this week, Ms Yellen defended the proposed corporate tax changes, which have been criticised by business groups in the US. The proposal “revamps a flawed corporate tax code that incentivises off-shoring and, instead, rewards companies that invest in America’s workers,” she said. “It ends the global race to the bottom for lower and lower tax rates, something that will stop corporations from shifting their profits into tax havens abroad.”