WASHINGTON, March 23 (Xinhua) -- U.S. President Joe Biden is considering an increase in corporate income tax rate, as one of the tax proposals to offset the cost of the upcoming long-term investment plans, Treasury Secretary Janet Yellen said on Tuesday.
"I think a package that consists of investment in people, investments in infrastructure, will help to create the jobs in the American economy and changes to the tax structure will help to pay for those programs," Yellen said at a hearing before the House Financial Services Committee.
The treasury secretary noted that the 1.9-trillion-U.S. dollar COVID-19 relief package recently rolled out has been deficit-funded, adding that a longer-term plan probably would be accompanied with some revenue increases.
Incorporating the direct effects of the 1.9-trillion-dollar relief measure, the Committee for a Responsible Federal Budget, a watchdog group, projects the federal deficit will now total 3.4 trillion dollars this year - higher than last year's record of 3.1 trillion dollars.
With enactment of the American Rescue Plan Act, the group now estimates the country's public debt will total 108 percent of GDP this year, which will surpass the prior record of 106 percent set just after World War II. The national debt will rise to 113 percent of GDP within a decade.
"Barring unforeseen complications, further borrowing should not be necessary. New tax and spending policies should be offset," Maya MacGuineas, president of the watchdog group, said in a recent statement.
At the congressional hearing, Yellen, however, noted that more spending is in the pipeline.
"Once the economy is strong again, we are beyond the pandemic, President Biden is likely to propose that we engage in long-term plans to address long-standing investment shortfalls in our economy," she said.
Yellen noted that investments in infrastructure, climate change, people, research and development, as well as manufacturing will make the U.S. economy more productive.
"This will be spending over a 10-year horizon and would require some additional funding," she told lawmakers.
According to an earlier report by The Wall Street Journal, the measure, which is expected to be divided into two main components, could cost over three trillion dollars.
One of the tax proposals Biden would consider is to increase corporate income tax rate back to 28 percent, Yellen said, noting that the current U.S. corporate income tax is among the lowest in developed countries.
A hike in corporate income tax, if enacted, would mark a reversal of policy from the Donald Trump administration. In late 2017, the Republican-controlled Congress passed a Trump-advocated tax reform bill, which slashed the corporate income tax from 35 percent to 21 percent.
At the congressional hearing, some lawmakers cautioned against raising taxes, especially while the economy is still recovering from the pandemic.
"We know that raising the corporate tax rates results in higher costs for small businesses, schools and American households," said Republican Representative Ann Wagner from Missouri.
"Why is this country beginning to reopen and recover economically with the Biden administration preparing tax policy which would in the end hurt the American family and millions of struggling small businesses?" She added.
Yellen, however, told lawmakers that the impact of the changes in corporate taxes have been studied for a long time, and the impact on prices and on consumers are "very unclear" from existing studies.
Senate Minority Leader Mitch McConnell, a Kentucky Republican, recently said that he thinks no Republican would vote in favor of raising taxes to pay for Biden's infrastructure plan.
Jeffrey Sachs, economics professor at Columbia University and a senior UN advisor, recently told Xinhua that there will be "a big debate" on the package going forward, with a highly divided Congress.
However, Sachs said he strongly urges and supports this longer-term package. Investing in infrastructure, he said, "really building the base of the economy."
"The United States hasn't done this properly in a long time," he said, adding that the country "needs to focus on infrastructure investment." Enditem