Will the infrastructure plan help or hurt your portfolio? - Part 1

Sid Queler

May 10, 2021

Investors would do well to consider the potential impact of higher corporate tax rates on financial market returns.

The American Jobs Plan (AJP), also known as the “infrastructure plan,” has been getting a lot of attention. The current version of the AJP, which we view as the Biden administration’s opening bid,  proposes to spend $2.7 trillion over eight years on transportation, water, electricity, broadband, clean energy, research and development, and other public investments. If passed, the plan may be funded with revenue raised through corporate taxes increases.

So far, investors have shown enthusiasm for potential infrastructure spending by boosting share prices of investments they believe may benefit if the bill passes. Investors would do well to consider the potential impact of higher corporate tax rates on financial market returns, too.

Infrastructure is essential to US competitiveness…

There is little dispute that infrastructure in the United States is in need of maintenance. In 2021, the American Society of Civil Engineers gave US infrastructure a grade of C- stating, “…we’ve made some incremental progress toward restoring our nation’s infrastructure. For the first time in 20 years, our infrastructure is out of the D range.”[1]

Infrastructure investments typically pay for long-lived assets that are essential parts of a nation’s social and economic structure. Often, finished projects have relatively low operating costs and become sources of recurring revenue.

When infrastructure deteriorates, it can hurt a country economically. Earlier this year, the Council on Foreign Relations reported, “US infrastructure is both dangerously overstretched and lagging behind that of its economic competitors, particularly China.”[2]

In 2019, the United States ranked second in overall competitiveness and 13th in infrastructure, according to the World Economic Forum’s 2019 Global Competitiveness Report.[3]

…and so is the corporate tax system

There is also little dispute that American corporate income tax rates are historically low. From the 1980s through 2017, the US corporate tax rate remained around 35%. Then, in 2017, the top rate decreased to 21%.[4]

Like infrastructure, corporate taxes affect our nation’s ability to compete. “Corporate tax systems are important … in terms of the revenue that they raise and the incentives for investment and innovation that they create,” explained the Organization for Economic Cooperation and Development (OECD).[5]

There are differing opinions about US tax competitiveness. Some contend that lowering the US corporate income tax rate to 21% made the United States more competitive among OECD countries. They think that increasing the rate will hurt economic growth, job creation and wages.[6]

Others agree that the tax statutory rate remains relatively high; however, they suggest the effective US tax rate—the amount of tax actually paid by companies—is competitive with other nations.[7] They point to the decades-long rise in US corporate profits as evidence of the competitiveness of the system.

It’s important for American companies to remain competitive from both infrastructure and tax perspectives. The AJP affects both. To learn more about the tradeoffs when infrastructure projects are financed with higher corporate taxes – and the possible impact on financial markets and investment portfolios – read part two of our series.


Sidney F. Queler is the chief growth officer of CIBC Private Wealth, US. In this role, he leads the firm’s business development team, setting strategies and practices that broaden relationships with individuals, families, foundations and endowments. Sid also serves as a member of the CIBC Private Wealth US Operating Committee and as a member of the advisory team for the firm's Boston office. In addition to leading national business development, he remains actively involved with client relationships.

The tax information contained herein is general and for informational purposes only. CIBC Private Wealth Management does not provide legal or tax advice, and the information contained herein should only be used in consultation with your legal, accounting and tax advisors.

[1] American Society of Civil Engineers, 2021.
[2] Council on Foreign Relations, April 8, 2021.
[3] World Economic Forum, 2019.
[4] Tax Policy Center, March 25, 2020.
[5] OECD, Corporate Tax Statistics, 2019.
[6] Tax Foundation, April 2, 2021.
[7] Economic Policy Institute, May 9, 2017.