US targets fossil fuel tax policies worth $35bn

President Joe Biden is making a renewed push for action on his $2 trillion infrastructure proposal, as his administration published more detailed estimates on the revenue it expects from repealing "subsidies" for fossil fuels.

Eliminating tax preferences and tax credits for fossil fuels would raise $35bn over the next decade, the US Treasury Department said in a report today offering fresh details on the tax component of Biden's infrastructure proposal. The report argues that existing tax benefits for the industry exacerbate climate change by making fossil fuels cheaper, and the money would be better spent encouraging clean energy and climate resilience.

"The President's tax incentives would help precipitate a shift toward cleaner energy and create high-paying jobs in green industries," the report says.

Biden last week unveiled his infrastructure plans, which aims to provide eight years of funding for rebuilding highways, expanding public transit, modernizing the electric grid, replacing old water pipes and expanding high-speed internet access. The administration aims to pay for that spending over 15 years primarily by increasing the corporate tax rate to 28pc from 21pc.

Republicans have balked at the idea of corporate tax increase, which they say would make the US less competitive and reduce job growth. But they have directed much of their criticism at Biden for requesting spending that does not fit the traditional mold of "infrastructure," such as plans to build new schools, modernizing hospitals for veterans and supporting a shift to electric vehicles.

"Less than 6pc of this massive proposal goes to roads and bridges," US Senate majority leader Mitch McConnell (R-Kentucky) said. "It would spend more money just on electric cars than on America's roads, bridges, ports, airports and waterways combined."

Biden today dismissed the criticism that his proposal was too broad, saying the idea of infrastructure has always "evolved" to meet the needs of the public. The administration argues the investments it is seeking would retain high-paying jobs, increase competitiveness and make the US more resilient to climate change.

"It depends on roads and bridges, airports, rail and mass transit," Biden said. "But it also depends on having reliable high-speed internet in every home, because today's high-speed internet is infrastructure. It depends on the electric grid, a grid that will not collapse in a winter storm."

Biden said he was "willing to negotiate" on the exact corporate tax rate and other parts of his plan, but he drew a red line on his promise not to raise taxes on families making less than $400,000/yr. Biden cited a recent study that 55 large corporations paid no federal income taxes last year to argue that a higher tax rate, along with a global minimum tax, would be fair.

"I am sick and tired of ordinary people being fleeced," Biden said.

Biden's promise not to raise taxes on low-income families has already led the administration to rule out raising federal taxes on gasoline and diesel to pay for infrastructure, which is supported by business groups like the US Chamber of Commerce that disfavors higher tax rates. Democrats will likely have to pass their infrastructure plan nearly entirely with just Democratic votes, and they see little political payoff in taking full ownership for unpopular tax hikes on fuel.

The US Treasury Department did not respond to a request for line-item details on its new estimate that repealing tax policies for fossil fuels would generate $35bn. Biden during his first week in office said he would ask the US Congress to eliminate "handouts to Big Oil to the tune of $40bn in fossil fuel subsidies."

By Chris Knight