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How Biden’s $2 Trillion Infrastructure Plan Can Help — and Hurt — Retail

As the United States economy looks ahead to a post-pandemic world, President Joe Biden has introduced a sweeping $2 trillion bill centered on infrastructure and jobs — one that, if passed, could have lasting repercussions on the retail sector.

According to the White House, the American Jobs Plan, which was unveiled in part last week, would invest billions of dollars in fixing and rebuilding roads, bridges and ports; expanding broadband access and upgrading electric grids; building affordable housing and other facilities; as well as revitalizing U.S. manufacturing, among other initiatives aimed at bolstering American jobs.

In tandem with the announcement, Biden revealed his Made in America Tax Plan — a proposal that would pay for the American Jobs Plan by raising the corporate rate to 28% from 21%. The provision, said the administration, would “reward investment at home, stop profit shifting and ensure other nations won’t gain a competitive edge by becoming tax havens.”

Here, industry leaders from the Footwear Distributors and Retailers of America, American Apparel and Footwear Association and the National Retail Federation explain what these plans mean for the shoe and clothing industries, and shed light on the hot-button issue of raising taxes on America’s biggest companies.

Addressing congestion at the ports

With West Coast ports currently overburdened with record levels of congestion and container shortages, trade executives are eyeing the government’s investment in America’s docks. According to experts, the uptick in imports has caused longer lead times and higher freight costs for brands and retailers, which are already contending with rapidly changing consumer preferences and other COVID-19-related supply chain disruptions, such as temporarily losing workers who might be on sick leave.

In total, Biden has earmarked $621 billion for transportation infrastructure. Specifically, $115 billion will be set aside for fixing roads, streets, bridges and highways, while another $85 billion will go toward modernizing public transit systems. He has also allocated $25 billion to upgrade airports and $17 billion to improve waterways and ports.

“As anybody can easily see from the severe logistical problems we are now enduring, such infrastructure investments are critical for the future of our industry and the U.S. economy,” AAFA SVP of policy Nate Herman said. “However, we need to be leery of how such investments are funded, so they don’t hurt the very employers these investments are designed to help.”

Raising the corporate tax rate

Four years after former President Donald Trump slashed the corporate tax rate to 21% from 35%, Biden is seeking to bump the tax back up to 28% — which NRF president and CEO Matthew Shay said in a statement would be the “biggest corporate rate increase in 70 years.” Because higher tax rates reduce companies’ ROI, some industry leaders suggest that the provision could discourage capital investment, potentially leading to job cuts and perhaps even more store closures following one of the most brutal years for the retail sector in modern-day America.

“Retail is certainly one of the industries that has benefited from the tax cut we saw [passed back in 2017],” said Jon Gold, VP of supply chain and customs policy at NRF. “Retailers have been able to take the money and reinvest that back into their companies, and it’s one of the reasons why retailers have been able to weather the storm of the COVID-19 pandemic and stay afloat, so I think there’s significant concern about looking to raise the corporate tax rate back up again, which could put us in a very paycheck-competitive position.”

Notably, however, Amazon CEO Jeff Bezos yesterday voiced support for raising the corporate tax rate. According to filings with the Securities and Exchange Commission, the e-commerce behemoth — which recorded revenues of $386.1 billion last year — paid $0 in U.S. federal income taxes for two years before 2019, when it paid a $162 million bill.

Further boosting e-commerce

The heaviest financial lift in Biden’s plan is centered around improving American homes and commercial buildings, schools and childcare facilities, as well as installing broadband services. The latter alone would receive a $100 billion investment — used to build high-speed networks across the country to make broadband universal for all Americans.

According to the White House, more than 35% of rural Americans lack access to broadband at minimally acceptable speeds. Trade executives suggest that the installation of such services could not only expand e-commerce’s reach, but also drive down internet costs and encourage more Americans to go online, whether to simply browse or make purchases.

“It’s safe to assume that injecting $2 trillion into American infrastructure will have a positive and lasting effect on our economy, the movement of goods and the ability for all Americans to access travel routes, digital resources and other initiatives focused on infrastructure,” said FDRA president and CEO Matt Priest. “While the pay for the bill will certainly be debated, the need to invest in infrastructure is often supported in a big bipartisan way.”

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