NEGOTIATING TACTICS TO GET BIDEN’S 2.25 TRILLION DOLLAR INFRASTRUCTURE PACAKGE PASSED

What happens if Biden cannot get his Infrastructure Bill with its many faceted parts passed or if he can’t get the 28% corporate tax rate he seeks (without giving up too much in return) or even the more modest 25% tax rate and what if he falls short of the total 2.25 Trillion dollar amount he seeks? What then? What could he do to get his (these) objectives met? What could he do to “sweeten the pie” for the necessary votes he would need if for some reason he fell short of an only 50,51 simple majority vote (versus the normal 60 vote majority needed in the Senate) for passage of this particular legislation which luckily falls under the less stringent “budget resolution” act Senate Parliamentary rules?

Here’s a solution and, I believe, a novel idea: To keep his corporate tax rate as close he can to his 28% goal and to keep as many programs as possible that his Infrastructure Bill contains and ALSO, instead, to get as much upfront funding that would be needed for the required startup costs for the Bill’s many projects versus the plan his has now, that is, to collect the Bill’s entire 2.25 trillion price tag steadily and slowly and equally over a projected 15 year period, he could, to incentivize the Republicans, Corporate America and the like—offer them a brand new type of U.S. Treasury Bond that would have the same kind of tax deferment features a 401(k) or IRA has unlike the present situation now where when you buy a U.S. Treasury Bond, you buy them without any tax deferment treatment whatsoever–the same as, say, as when you buy stocks, real estate, certificates of deposit or even a pair of tennis shoes–that is, you buy them with dollars after you’ve already paid your income tax UNLIKE when you buy into and establish or further contribute to a 401(k) or IRA account. That’s right, when you buy into a 401(k) or IRA, you FIRST GET TO DEDUCT THOSE DOLLARS FROM YOUR NET AGI (Adjusted Gross Income) BEFORE, BEFORE, THAT’S RIGHT BEFORE YOU PAY YOUR TAXES!!!

Please note, On top of this anticipated delay in collecting all the tax revenue needed to pay for this Infrastructure Bill, without such a new bond series this 15 year delay in collecting all the funds needed to finance Biden’s Bill, would most certainly involve more initial QE (Quantitative Easing)—that is, another expansion of an already strained Federal Reverse Balance Sheet increasing, even more, the possibility of unwanted down-the-road inflation from yet another further shot-in-the-arm injection of additional dollars (money supply) being pumped in to jump-start all that needs to be done.

Now, keep in mind, those taking advantage of this new NOVEL bond buying program would still have to pay the tax on those dollars that these new style bonds are purchased with BUT ONLY WHEN THE BONDS REACH MATURITY OF WHEN THE BOND HOLDER CHOOSES TO REDEEM THEM!!!! THEN AND ONLY THEN WOULD YOU PAY THE TAX ON THESE DOLLARS BUT NOT ANYTIME BEFORE! But then you ask what would be the advantage of this to the bond holder purchaser since he/she, a corporation still has to pay the tax?

THESE SUCH BONDS could be held as long as one desired and BUT MORE IMPORTANTLY could ALSO be taken out and declared in a year of downturn of income to cover any losses such as in a year of negative or minimum/nominal income still keeping/staying within a lower tax bracket THAN THE TAX BRACKET WHEN THE BONDS WERE PURCHASED. That is, if such above described strategy were employed, the tax paid on these dollars would actually be less than the new 28% or 25% or whatever the new corporate tax rate is when the bonds were originally purchased having been “but-for” such purchase the tax on these dollars would have had to have been paid. Also if the bond holder individual or corporate had a better specific investment to make like the stock market or a business startup, expansion, improvement/refurbishment, or research and development, he/she or corporation could “cash in” their bonds but remember they’d have to pay the tax that was deferred when the bond(s) were originally purchased.

Such are the advantages to the bond holder of these newly created bonds. Now, The advantage to Biden would be two-fold: First, this possibly could be the “bargaining chip” he needs to get the vote he needs to pass his Bill if there was a “sticking point” in negotiating and (2) this ploy/method would additionally allow him to “grubstake” his Bill’s programs and multi-project startup costs with FOUR times the dollar amount he would otherwise get if he could ONLY collect the tax on these particular taxable dollars without this novel “profit carry forward” option made available to those electing tax deferment through this newly created bond series. BUT REMEMBER WHEN THESE PREVIOUSLY ISSUED BONDS MATURE OR ARE REDEEMED, THE TAX PREVIOUSLY DEFERRED ON THESE BONDS WOULD NOW BECOME IMMEDIATELY DUE AND OWING!!

Also, another feature that could be of these infrastructure bonds might be where one could “convert” these tax-deferred bond instruments if interest rate bond yields were to climb to a sufficient level that holding them as a regular bond investment would become profitable—that is, where collecting the usual annual (semi-annual) yield returns now becoming available (rising to an acceptable level) versus the tax still owed on these bonds would be of an adequate positive cash flow. And if it could be worked out where the tax owed could be prorated over the remaining duration of the bond such that if subtracted from the yield produced would result in a profit then that would become a possible option for the investor/bond holder. Such bonds described above could become referred to as Convertible U.S. Treasury Bonds (to be differentiated from the usual meaning of a Convertible (Corporate) Bond where an investor purchasing a corporate bond can later convert (has the option) to convert his corporate bond into shares of stock in that corporation.)

The government would be able to literally raise in this way HUNDREDS OF Billions of dollars every year to finance their necessary expenses and obligations. But may you ask—What happens when these bonds mature? Don’t you have to pay these bond holders back? What then? They would be paid back by a steady stream of new money coming in every year from new and also repeat corporations, institutional investors and wealthy individual investor/taxpayers wanting to shield and delay paying taxes on newly earned income as it is earned EACH AND EVERY YEAR! Unless, as stated before, the taxpayer or corporation had a better specific investment to make like in the stock market or a business startup, expansion, improvement/refurbishment, or for research and development, etc where extra capital was needed for such a purpose. BUT AGAIN REMEMBER WHEN THEIR PREVIOUSLY ISSUED BONDS MATURE OR ARE REDEEMED, THE TAX PREVIOUSLY DEFERRED ON THESE BONDS WOULD NOW BECOME IMMEDIATELY DUE AND OWING TO THE GOVERMENT!! This would be in addition to all the taxes ALREADY being collected EVERY YEAR from every individual taxpayer plus, of course, all corporate entities paying their 28% or 25% or whatever Biden’s Infrastructure Bill would when passed dictate.

Another BIG Major Benefit by having this newly created Bond Series (let’s call it Biden’s Build Back America Better Bond Series) would be better INTEREST RATE CONTROL BY THE FED OVER THE ENTIRE BOND MARKET!!

With a YEARLY influx of bond purchasers to take advantage of shielding income from taxes in any one particular year but instead to be used in a later year for that particular taxpayer’s tax advantage, the Treasury Department would need to hold less Bond Auctions where under certain circumstances, future or immediate funds are needed to smoothly carry out government operations and meet necessary obligations.

To successfully GET the required volume of sales in auctions, interest rates are sometimes raised to make the yields of these bonds attractive enough to garner the total dollar amount the government might need to meet its intended target. If such were the case, this would also have the ancillary, secondary but yet just as important effect of not protecting existing bondholders from devaluation of the principals of any bonds already being held with (now) lower interest rate yields. Again, with a major influx of bond purchasers to take advantage of shielding income from taxes in any one particular tax year AND SUCCEEDING YEARS, this would necessarily reduce the need to conduct periodic auctions thereby, at the same time, reducing the chances of having to raise yield-interest rates to attract new buyers thus better protecting any current pre-existing bond holders holding bonds with lower rate yields.

Another BIG Major Benefit would a better use and allocation of money supply throughout The Economy in general. Right now, as we speak, because of the pandemic, there are, at present, less business opportunities for money to be invested in. Less people are working, thus there is less consumer demand and less reason to be opening, starting new business ventures. This is another reason why the stock market is doing so well. Although, the stock market is being bid up in anticipation of the return to normalcy and better business as the pandemic subsides, there is a certain inflationary component because of the lack of other present business opportunities (meaning “in a nutshell” no other place for the investor and entrepreneur to “park” his or her money) and this proposed bond series with its tax deferment benefits would draw a lot of this “extra” investment capital away from an already overbid INFLATED stock market for the reasons given above.

Now, here’s a basic very basic fundamental question—If this new bond offer were to be employed, wouldn’t there be less tax revenue by virtue of wealthy institutional and individual investors and many corporations taking advantage of its tax determent? However, it IS argued that the amount of total immediate cash dollars raised by such bond sales of this new type of bond versus the amount of tax loss involved would still make sense for the government to do the new bond series sales because of the sheer volume of dollars raised even though these dollars each and every one of them would have to be paid back at some time in the future in the years to come either upon bond maturity or voluntary redemption. BUT ALSO REMEMBER WHEN THESE PREVIOUSLY ISSUED BONDS MATURE OR ARE REDEEMED, THE TAX PREVIOUSLY DEFERRED ON THESE BONDS WOULD NOW BECOME IMMEDIATELY DUE AND OWING AS WELL subject, of course, to when applied in a year where one or a corporation suffered a loss or had low or minimal income shifting the deferred tax from that bond into a lower tax bracket. BUT REMEMBER AND FURTHERMORE, because of the many investors and corporations shielding a portion of their earnings EACH AND EVERY YEAR for one reason or another, there would be a steady flow of new dollars coming in annually to retire those bonds maturing or being redeemed AS WELL!

In closing, if this idea were to “catch on” what could very well happen would be—the main source of revenue for the government to finance the their cost of running the government and its many arms and functions, the military and anything else you can think of would shift from taxes to borrowed money from the sale of bonds and again—to be paid back, in part, every year by new and repeat big corporations, institutional investors and wealthy individual investor/taxpayers wanting to shield and to delay paying taxes on (even more) newly earned income AND ALSO PAID BACK IF NEEDED BY the government’s general tax base revenue for any excess bond payouts, and including, if needed, by the newly generated tax from any tax deferred bonds maturing or being redeemed or by holding bond auctions, or simply expanding the Fed balance sheet through Quantitative Easing (by issuing bonds to themselves and printing the necessary money needed.) [Hopefully, under this new system, money (supply) would be utilized more efficiently and as a result, QE would be used much less frequently, if at all. Elimination of QE, this author believes, is the first step in controlling inflation, preserving the value of the dollar and a balanced budget.]

That is, there would a “qualitative (philosophical) shift” (if you will) in the way the U.S. Government finances its operations. Presently, the government relies on taxes, tariffs, the sale of military hardware, etc. to run its many operations. What we don’t collect in taxes, tariffs, etc., we then issue bonds to raise the capital to cover the rest of our “out-go”. Under this new bond series sales scenario, however, the revenue from bond sales would, instead, become a more significant source of financing government and its operations and taxes normally collected in the traditional sense would be relegated to a less dominant role to be used to supplement any costs of operations and funding unlike now where taxes currently are the primary source of income and revenue.

IN SHORT, UNDER THIS NEW SYSTEM, TAXES AND TAX STRUCTURE WOULD STILL EXIST, BUT THERE WOULD BE A NEW EQULIBRIUM ESTABLISHED BY “TRIAL AND ERROR” AND (HOPEFULLY A “DOWNWARD”) TAX CODE STRUCTURE READJUSTMENT BETWEEN BOND REVENUES AND TAX REVENUE FOR HOW THE GOVERNMENT RUNS ITS OPERATIONS.

rely on the 15 year corporate tax revenue (hamster speed) collection regime his Bill is presently relying on.

Biden is looking at some stiff opposition with no cooperation in sight from the Republican Party regarding the passage of his upcoming comprehensive Infrastructure Bill although per Senate legislative procedure falling under a special “budget resolution” parliamentary rule, his bill would be technically eligible for a simple 50, 51 vote majority for passage versus the normal 60 vote majority required in the Senate for all other bills. 

The opposition to his bill is two-fold: Many parts of the Bill do not fall within the traditional meaning of just what is normally considered to be “Infrastructure” and the corporate tax rate being immediately raised to 28% from what is now—21% along with the imposition of an additional wealth tax for those making over $400,000 is not making any friends with the Republican Party nor Corporate America and the like!

If for some reason Biden no longer has that 50, 51 vote simple majority (with even in the extreme case if it falls upon Vice President Harris to break a 50/50 vote tie) then–What then??

To back up a little bit—The Republicans argue that only 6% of the bill goes to traditional infrastructure such as roads and bridges and only 20% of the total bill even if one takes into consideration the more modern forms of infrastructure such as “broadband”, the rest of the bill being for other things Republicans do NOT consider “infrastructure”. Also the sheer 2.25 Trillion to be spent is objected to by the Republicans especially in view of the fact this is to be based upon a corporate tax increase from the present 21% to 28% not to mention the 1.9 Trillion authorized on Biden’s Covid Relief Bill. Just to give some perspective—Up to the beginning of the covid pandemic, the U.S. government was going over budget at the rate of about 800 Billion per year—our cumulative National Debt going on 22 Trillion. Now, in the last year—just in the last year alone, we’ve run up almost another 7 Trillion. By the time, this pandemic clears and we can take off our masks, we’ll be at $30 Trillion IN DEBT—IN THE RED!!]

Now, getting back to the present, if Biden couldn’t get a simple majority vote in the Senate and needed to negotiate with the Republicans and still keep most of his bill and its “price tag” in tact, what could he do? What could he offer the Republicans that would get their cooperation and votes?

Here’s how I think he could “sweeten the deal.”>>>>

Just a little background information first and what lawyers would say—“to lay a foundation”—What Biden could really use in addition to cooperation from the Republican Party and Corporate America is an immediate cash infusion to help start and initially fund all the projects and programs he wants to do. As it stands, the yearly tax collected from corporate America and wealthy individuals even with the tax increase he desires would not come close to all the funds immediately needed even though it is calculated such taxes would fully fund his entire Bill requirements in the 15th year of this proposed additional (corporate and wealth) tax imposition.

On top of this corporate and wealth tax increase, this anticipated delay in collecting all the tax revenue needed to pay for this Infrastructure Bill would most certainly involve more initial QE (Quantitative Easing)—that is, another expansion of an already strained Federal Reverse Balance Sheet increasing, even more, the possibility of unwanted down-the-road inflation from yet another further shot-in-the-arm injection of additional dollars (money supply) being pumped in to jump-start The Economy.

What Biden could do to smooth things over with corporate America, wealthy individuals and The Republican Party and avoid some of this QE and yet another expansion of the Fed Balance Sheet and more efficiently use the dollars (the money supply) already in our overamped dollar rich in-the-aggregate total encompassing economic system—is—instead of continuing to have the present situation where our many surplus dollars keep bidding up (inflating) the DJA (Dow Jones Average and other Wall Street Stock Market share prices, in general*) [*this “inflationary” aspect occurring on Wall Street to be explained in detail towards the end of this article.]—is to offer the Republicans a deal they won’t want to refuse.

What Biden could do—to “smooth things over” and make “peace” with the Republican Party and Corporate America is to offer a uniquely new type of bond!!—one with a “juicy” tax-deferment status!!—the same kind of tax-deferment treatment given when one buys into a 401(k), IRA—that is, the income from any one particular year to purchase a 401(k), IRA being allowed to be deducted from the total income earned that year, meaning, one does NOT pay tax on that income used to buy into the 401(k), IRA until such money is eventually withdrawn from that 401(k), IRA account years later.

Although these Infrastructure bonds WOULD HAVE NOTHING TO DO WITH RETIREMENT but because Biden needs immense cash infusion to start up his projects and as an inducement to purchase these bonds as bond yield interest rates are currently extremely low, he could offer these infrastructure bonds with THIS EXTRA incentive proviso that any amount purchased could be deducted from one’s or a corporation’s tax return in the (current) year of bond purchase–thus lowering one’s or a corporation’s taxes to be paid (in any one particular year.)

Basically, to any investor/bond purchaser of these above described bonds, such bond purchases would act as a tax avoidance tactic—a tax shield and SHELTER for those purchasing these bonds unlike the norm where U.S. Treasury Bond purchases just like any other stock purchase are NOT given any such preferential tax (deferment) treatment. THIS WOULD BE A BIG INCENTIVE TO REPUBLICANS AND THOSE REPRESENTING CORPORATE INTERESTS TO GAIN THEIR VOTE IF BIDEN COULD NOT GET A SIMPLE MAJORITY IN THE SENATE FOR HIS UPCOMING INFRASTRUCTURE BILL!

Continuing on, SUCH BONDS could be held as long as one desired and could ALSO be taken out and declared in a year in downturn of income to cover any losses such as in a year of negative or minimum/nominal income still keeping/staying within a lower tax bracket. Currently, Biden wants the corporate tax rate to be set at 28%. The Republicans and Corporate America are dead set against this rate rise from 21%. Many Republicans think 25% should be the max. This type of bond, I’m suggesting, with this added component 401(k), IRA type tax deferment features, could be an important bargaining chip in arriving at a solution with the Republican Party and Corporate America.

Also, another feature that could be of these infrastructure bonds might be where one could “convert” these tax-deferred bond instruments if interest rate bond yields were to climb to a sufficient level that holding them as a regular bond investment would become profitable—that is, where collecting the usual annual (semi-annual) yield returns now becoming available (rising to an acceptable level) versus the tax still owed on these bonds would be of an adequate positive cash flow. And if it could be worked out where the tax owed could be prorated over the remaining duration of the bond such that if subtracted from the yield produced would result in a profit then that would become a possible option for the investor/bond holder. Such bonds described above could become referred to as Convertible U.S. Treasury Bonds (to be differentiated from the usual meaning of a Convertible (Corporate) Bond where an investor purchasing a corporate bond can later convert (has the option) to convert his corporate bond into shares of stock in that corporation.)

Another BIG Major Benefit would better INTEREST RATE CONTROL BY THE FED OVER THE ENTIRE BOND MARKET!!

With a major influx of bond purchasers to take advantage of shielding income from taxes in any one particular year but instead to be used in a later year for that particular taxpayer’s tax advantage, the Treasury Department would need to hold less Bond Auctions where under certain circumstances, future or immediate funds are needed to smoothly carry out government operations and meet necessary obligations.

To successfully GET the required volume of sales in auctions, interest rates are sometimes raised to make the yields of these bonds attractive enough to garner the total dollar amount the government might need to meet its intended target. If such were the case, this would also have the ancillary, secondary but yet just as important effect of not protecting existing bondholders from devaluation of the principals of any bonds already being held with (now) lower interest rate yields. Again, with a major influx of bond purchasers to take advantage of shielding income from taxes in any one particular tax year AND SUCCEEDING YEARS, this would necessarily reduce the need to conduct periodic auctions thereby, at the same time, reducing the chances of having to raise yield-interest rates to attract new buyers thus better protecting any current pre-existing bond holders holding bonds with lower rate yields.

Another BIG Major Benefit, as touched on earlier, would a better use and allocation of money supply throughout The Economy in general. Right now, as we speak, because of the pandemic, there are, at present, less business opportunities for money to be invested in. Less people are working, thus there is less consumer demand and less reason to be opening, starting new business ventures. This, as stated, I believe, is another reason why the stock market is doing so well. Although, the stock market is being bid up in anticipation of the return to normalcy and better business as the pandemic subsides, there is a certain inflationary component because of the lack of other present business opportunities (meaning “in a nutshell” no other place for the investor and entrepreneur to “park” his or her money) and this proposed bond series with its tax deferment benefits would draw a lot of this “extra” investment capital away from an already overbid INFLATED stock market for the reasons given above.

Now, here’s a basic very basic fundamental question—If this new bond offer were to be employed, wouldn’t there be less tax revenue by virtue of wealthy institutional and individual investors and many corporations taking advantage of its tax determent? However, it IS argued that the amount of total immediate cash dollars raised by such bond sales of this new type of bond versus the amount of tax loss involved would still make sense for the government to do the new bond series sales because of the sheer volume of dollars raised even though these dollars each and every one of them would have to be paid back at some time in the future in the years to come either upon bond maturity or voluntary redemption. BUT ALSO REMEMBER WHEN THESE PREVIOUSLY ISSUED BONDS MATURE OR ARE REDEEMED, THE TAX PREVIOUSLY DEFERRED ON THESE BONDS WOULD NOW BECOME IMMEDIATELY DUE AND OWING AS WELL subject, of course, to when applied in a year where one or a corporation suffered a loss or had low or minimal income shifting the deferred tax from that bond into a lower tax bracket. AND FURTHERMORE, because of the many investors and corporations shielding a portion of their earnings EACH AND EVERY YEAR for one reason or another, there would be a steady flow of new dollars coming in annually to retire those bonds maturing or being redeemed AS WELL!

In closing, if this idea were to “catch on” what could very well happen would be—the main source of revenue for the government to finance the their cost of running the government and its many arms and functions, the military and anything else you can think of would shift from taxes to borrowed money from the sale of bonds and again—to be paid back, in part, every year by new and repeat big corporations, institutional investors and wealthy individual investor/taxpayers wanting to shield and to delay paying taxes on (even more) newly earned income AND ALSO PAID BACK IF NEEDED BY the government’s general tax base revenue for any excess bond payouts, and including, if needed, by the newly generated tax from any tax deferred bonds maturing or being redeemed or by holding bond auctions, or simply expanding the Fed balance sheet through Quantitative Easing (by issuing bonds to themselves and printing the necessary money needed.) [Hopefully, under this new system, money (supply) would be utilized more efficiently and as a result, QE would be used much less frequently, if at all. Elimination of QE, this author believes, is the first step in controlling inflation, preserving the value of the dollar and a balanced budget.]

That is, there would a “qualitative (philosophical) shift” (if you will) in the way the U.S. Government finances its operations. Presently, the government relies on taxes, tariffs, the sale of military hardware, etc. to run its many operations. What we don’t collect in taxes, tariffs, etc., we then issue bonds to raise the capital to cover the rest of our “out-go”. Under this new bond series sales scenario, however, the revenue from bond sales would, instead, become a more significant source of financing government and its operations and taxes normally collected in the traditional sense would be relegated to a less dominant role to be used to supplement any costs of operations and funding unlike now where taxes currently are the primary source of income and revenue.

IN SHORT, UNDER THIS NEW SYSTEM, TAXES AND TAX STRUCTURE WOULD STILL EXIST, BUT THERE WOULD BE A NEW EQULIBRIUM ESTABLISHED BY “TRIAL AND ERROR” AND (HOPEFULLY A “DOWNWARD”) TAX CODE STRUCTURE READJUSTMENT BETWEEN BOND REVENUES AND TAX REVENUE FOR HOW THE GOVERNMENT RUNS ITS OPERATIONS.

Share:

Share on email
Email
Share on print
Print
Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on reddit
Reddit

More Posts

ON HEALTHCARE

A PLAN FOR HEALTHCARE COVERAGE FOR ALL This Plan would be Comprehensive Universal Healthcare Plan for ALL and would be a hybrid of Private Coverage

Read More »

ON INFRASTRUCTURE

(1) In our last article on the Warren Wealth Tax and how it could be better and more sensibly applied–We made the following proposition and

Read More »

Have any Comments?

Share:

Share on email
Email
Share on print
Print
Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on reddit
Reddit

Leave a Reply

More Posts

ON HEALTHCARE

A PLAN FOR HEALTHCARE COVERAGE FOR ALL This Plan would be Comprehensive Universal Healthcare Plan for ALL and would be a hybrid of Private Coverage

Read More »

ON INFRASTRUCTURE

(1) In our last article on the Warren Wealth Tax and how it could be better and more sensibly applied–We made the following proposition and

Read More »