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Biden’s tax plan is in the best interest of our economy: White House CEA

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Heather Boushey, member of the White House Council of Economic Advisers, joins Yahoo Finance to discuss President Joe Biden’s infrastructure plan.

Video Transcript

JULIE HYMAN: Let's talk to a representative of this administration. And I should mention as we have this discussion, the backdrop for this is the jobless claims numbers that we got this morning, ticking up to 719,000, higher than estimated, breaking above 700,000. Once again as well, these numbers are noisy so to speak. There is allegedly some fraud in the numbers. There's also a lot of seasonality. So take them for what they are.

But we, of course, are still getting a monthly jobs report tomorrow. To talk about all of this and what this new plan from the administration could mean, Heather Boushey is with us. She's a member of the White House Council of Economic Advisors. Heather, it's good to see you again. You know, as we hear just talk about the sparring that now begins about this plan, with such a big, ambitious plan, how are you viewing the sort of core most important deal-breaker parts of it that really are the most important to you?

HEATHER BOUSHEY: Oh, that's such a great place to start. After spending so much time thinking and working on this and understanding just how important all of these pieces are to the American people and to our economy, it's hard to pick just one. But let me focus on a couple that I think are really pivotal. We know that the United States has fallen behind in the-- our investments in infrastructure writ large, defined broadly across our economy.

And we know that, in order for us to remain competitive as we move into this 21st century, we need to make up for the fact that we are falling behind not just in investing in physical infrastructure but in human infrastructure and in ideas and in innovation. If we want to be competitive, if we want to be that innovative leader, these are the kinds of investments that we as a country need to make.

So I'm particularly excited about the investments in research and development. I'm excited about the investments to own the electric vehicle industry, those investments in battery technology and in making sure that we have those charging stations all across the country. So that we can be a leader in what we know will be a really important technology that's going to drive the future of automobiles.

And I'm really excited about the way that the whole package thinks about economic resilience, both in terms of climate change but also in addressing the families, the needs that families have for the kinds of care infrastructure that's included in this package.

BRIAN SOZZO: Heather, what we didn't hear yesterday is how much taxes on households may go up to help pay for this plan. Is that 400,000 mark that President Biden has cited repeatedly, is that the red line in the sand here?

HEATHER BOUSHEY: That is definitely, it has been the red line. It continues to be the red line. It is a priority of the president. The tax package that was announced as a part of the American jobs plan, the main American tax plan, focuses on corporate profits. And what it does is it seeks to readjust our corporate tax system, to focus on making things here in the United States, to not encourage firms to shift their profits overseas or to shift their production overseas, and to make sure that we have a tax system that is fair and taxes those excess profits from those most profitable firms in our economy.

So that we can make these investments that benefit every firm in America, that benefit every family in America, the kinds of investments in basic R&D and roads and bridges, transportation, safe drinking water, a power grid that doesn't fail. All of these benefits that are included in the plan will benefit firms across our economy.

JULIE HYMAN: Heather, it seems as though there is some moderate willingness perhaps to wiggle on that corporate tax rate but maybe not to 28%. What could the administration live with in terms of an increased tax rate but maybe not that high? Would it be 25% say as a compromise point?

HEATHER BOUSHEY: Well, so the president has been very, very clear, and he said this in the speech yesterday, that this is the opening bid. This is where he is starting, the plan that he has put together that started on the campaign. And he wants to hear from people. He wants to hear from folks on both sides of the aisle. The team is out meeting with people, listening to them. So that we can make sure that the package really meets the needs of the American people.

But like with the American Rescue Plan, the goals are clear. This package needs to make sure that it addresses the urgent and important needs in front of us.

MYLES UDLAND: And Heather, along those lines, thinking maybe more philosophically about how, you know, fiscal policy gets done now and going forward, there was such a focus for so many decades on everything needed to be paid for and how you balance all of these plans. Just in your conversations kind of as a team and also talking to lawmakers, is there now a view that we don't need to account for every last dollar.

Because over time these things will pay back, not to mention the fact that markets are obviously quite amenable to additional deficit spending from the US government.

HEATHER BOUSHEY: You know, interest rates remain at historic lows, which provides the federal government with a lot of opportunity to make the investments that we believe are the most economically important for America's long-term competitiveness, to grow America's middle class. So I think that's where we start. It is also the case that the tax plan that was laid out yesterday is in the best interest of our economy.

It addresses fundamental distortions that were introduced as a part of the 2017 Tax Cuts and Jobs Act, that encouraged profit shifting, that encouraged firms to move overseas. And so there's both good reasons to implement this tax package. And there's good reasons to make sure that the necessary spending that we need to do happens, even if we can't quite match every single dollar.

But the important thing is that we need to focus on what is going to be best for the American people, what's going to grow the middle class, and what's going to enhance the long-term competitiveness of our economy. And making investments in infrastructure and making sure that our tax system is fair and just and encourages investment here in the United States, those are the goals.

BRIAN SOZZO: Heather, we talk to a good number of CEOs here at Yahoo Finance. And they universally say we need an infrastructure plan. We're on board with it. But we view-- we don't think a 28% corporate tax rate is globally competitive. And we might pull back on our investment plans. What's the administration's message to CEOs?

HEATHER BOUSHEY: Well, you know, what we've seen is-- really, in recent decades, we've seen tax rates fall. We saw that very sharp cut in corporate tax rates as a part of the Tax Cuts and Jobs Act. And what the research evidence has shown is that you actually did not see a strong burst in investment due to those tax cuts. So I think the question that we need to ask of the American people and American businesses is we need to make these investments.

We can't have bridges falling down. We can't have lead in our water. We can't have power grids that fail. We need to make these investments. And we need to focus on a pay for that makes sense and that taxes those that are making the most profits, that are benefiting the most in many ways from the magnificent resources of our country, both in terms of the physical infrastructure, the human infrastructure, and the natural resources. So that I think is the administration's response to that really important question.

JULIE HYMAN: Heather, great to see you. Thanks for being here. Heather Boushey is a member of the White House Council of Economic Advisors. Appreciate your time this morning.