President Biden and the Democrats have agreed on a $3.5 trillion budget proposal. This spending proposal on key Biden initiatives over the next decade is in addition to the $600 billion infrastructure spending that has already been proposed.
Outline of the budget proposal
Michael James, Wedbush Managing Director in Los Angeles says, “This is a massive expenditure proposal, and any companies in the Infrastructure supply chain will be beneficiaries (think Steel, Cement, Pipes and Tubing).”
The budget focuses on infrastructure, improving access to healthcare, adding jobs and other priorities that the Biden administration supported through his 2020 campaign and into his first months as president.
Since the proposal prohibits additional taxes on individuals, farmers and small businesses earning under $400,000, this indicates that the Democrats will look towards raising taxes on corporations and the wealthy to fund the programs in this plan.
This could lead wealthy individuals to take measures to mitigate the tax hit to their situations where available. It could also lead corporations to make structural changes, but the Democrats have indicated that they will seek to limit the ability of companies to lighten their tax load by moving operations offshore.
Major areas of spending
The budget proposal includes several major areas of spending, including:
- Extending the temporary tax credits in the COVID relief plan signed by the president in March. This includes the Child Tax Credit, the earned income tax credit and the child and dependent care tax credit.
- Funding for a wide range of climate change programs and initiatives with stated goals of achieving 80% clean energy and a 50% reduction in carbon emissions by 2030.
- Funding for various childcare and family related programs. Among these are universal Pre-K funding, funding for extended family and medical leave, nutrition programs and affordable housing initiatives.
- A variety of workforce and business investments aimed at small businesses.
Additional third measure
The additional third measure of the budget proposal is the president’s infrastructure program. Infrastructure is broadly defined to include expanded broadband access in addition to the more traditional improvements for roads and bridges around the country.
This work includes upgrading ports and airports around the country, delivering clean drinking water to as many Americans as possible and building an upgraded electric power grid.
This portion of the spending proposal is even more widespread and includes upgrades to schools, childcare facilities, veteran’s hospitals and various federal buildings. The plan also includes solidifying the infrastructure of our care system including creating new jobs and improving wages and benefits for essential home care workers.
All of this is part of the president’s American Jobs Plan and is a priority for the White House.
Potential impact of the budget
James says, “You would have to think there will be significant borrowing needed to finance all of this, and that supply (along with the likely upward inflationary pressures) should lead to further higher rates and a benefit to the Financials.”
This budget proposal has components that will benefit a number of industries and companies in those industries. Certainly, those in traditional infrastructure areas such as construction could benefit. Those in the digital infrastructure space stand to benefit as well. Companies in a leadership position in the digital arena could profit handsomely from this part of the package.
Companies with a leadership role in the child and dependent care space could benefit from the added spending there.
In evaluating companies that will benefit from this package if fully passed, it’s important to look at various industries that could benefit as well as specific companies in those industries. Not every firm in a related area will benefit, some may miss out on benefiting from the added spending.
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