While testifying before the House Financial Services Committee, Yellen said an infrastructure package — which the White House is expected to pursue as its next legislative priority — will likely be paid for by reforms to the tax code.
"We expect to examine changes to tax policy along with programs that will address some of the long-standing problems that have held down productivity and labor supply in the United States," Yellen said. "We'll address infrastructure, clot risks from climate change, education, training."
The specific contours of the infrastructure package, and the tax increases that it may include, are still unclear; however, Biden repeatedly pledged during the 2020 presidential campaign to raise the corporate tax rate to 28% from 21%, increase the income tax rate on individuals earning more than $400,000, expand the estate tax, create a higher capital-gains tax rate for individuals earning at least $1 million annually and pare back tax preferences for so-called pass-through businesses.
An analysis of Biden's tax plan conducted by the Tax Policy Center estimated it would raise $2.1 trillion in new revenue over a decade.
The multipart bill could cost as much as $3 trillion, according to The Wall Street Journal, and would be the basis of Biden's “Build Back Better” plan, a wide-ranging infrastructure and jobs measure that would include policies to combat climate change, as well as ways to revitalize the manufacturing industry and revamp housing, education and health care. (Yellen said Tuesday the proposal will have "sustainable infrastructure" and "create green jobs").
"I think a package that consists of investments in people, investments in infrastructure, will help to create good jobs in the American economy," Yellen said. "Changes to the tax structure will help to pay for those programs."
Still, top Republicans are already balking at the prospect of raising taxes, with Senate Minority Leader Mitch McConnell saying last week that there will not be bipartisan support for such a move. The Chamber of Commerce has also raised concerns about hiking the corporate tax rate, warning it would "make the United States a less attractive place to invest profits and locate corporate headquarters."
Yellen defended the administration's expected push for tax increases, saying that Biden will not "propose policies that hurt small businesses or Americans."
"A longer-term plan that addresses the economy probably would be accompanied by some revenue raisers," she said. "We do need to raise revenues in a fair way to support the spending this economy needs to be productive and competitive."