Business Leaders Push for Infrastructure Deal, Minus the Corporate Tax Hikes

Several Senate Republicans are meeting with Mr. Biden at the White House on Thursday to explore a possible deal.

“It’s sort of confusing to me what the policy goal is here,” Eli Lilly & Co. Chief Executive David Ricks said in an interview. “Industry drives a huge amount of capital spending and private infrastructure. Taxing that seems like a bad idea when we try to recover the economy.” A spokesman said the company is waiting to see more details on the plan before further comment on how it should be paid for.

Following the 2017 corporate tax cuts, Indianapolis-based Lilly boosted its capital spending in the U.S., including construction of a new drug plant in North Carolina. Lilly said it is the company’s first new U.S. plant since 2006 when it built facilities in Puerto Rico and Indiana. “Now we have to reconsider all those things if they raise the rates,” Mr. Ricks said.

The issue was a common topic on earnings calls in recent weeks.

“If we were to raise rates even to 25% and you include tax from states, we become the highest-rated developed country in the world with respect to tax rates,” said Joseph Wolk, chief financial officer of Johnson & Johnson. SL Green Realty Corp. CEO Marc Holliday said: “Nobody wants a tax increase. I mean, that’s for sure.”

Some executives and business groups have offered financing alternatives, including fees from users of new infrastructure, such as tolls, and creation of a federal infrastructure bank to boost projects through loans. The Business Roundtable, a trade group of corporate executives, said if necessary the government should borrow more, arguing that every dollar in investment generates more economic growth.

Representatives from the group briefed congressional staff Wednesday on why they believe corporate tax hikes are a bad idea.

Mr. Biden, whose overall spending proposals already reach $6 trillion, has resisted more debt in private conversations with lawmakers. He has traveled to states to pitch his proposals, including to an aging water plant in New Orleans, and has additional meetings with lawmakers this week.

“I’ve been encouraged. Nobody likes to talk about the pay-fors, but there is room for compromise,” said Commerce Secretary Gina Raimondo, who has spoken with more than 50 executives, including those at Alphabet Inc.’s Google, AT&T Inc., Dell Technologies Inc., Ford Motor Co. , Intel Corp. and Medtronic PLC.

The administration outreach is designed to attract powerful allies who have traditionally favored Republican policy on taxes or at least counter that opposition by highlighting the benefits of the far-ranging package. The White House also feels it has politics on its side, with polling showing broad support for infrastructure spending and raising taxes on business.

“They know what’s in it for them,” said Ms. Raimondo, who has talked with executives about China’s massive investments in infrastructure and technology and a need to stay competitive.

Some tech companies have rallied around Biden’s proposal for tens of billions for research and development and to strengthen domestic semiconductor production but are pushing back on restrictions to company use of international tax havens.

Telecommunications companies have welcomed some proposals to expand broadband internet access. The auto sector has said it supports tax credits to spur adoption of electric vehicles. Manufacturers have said they like provisions to improve supply chains, according to more than a dozen executives and statements from trade associations.

And some executives have said their companies can tolerate a tax rate above the current 21% but not necessarily the 28% Mr. Biden seeks. They include Lyft Inc. President John Zimmer and Amazon.com Inc.’s Jeff Bezos, whose company has drawn criticism over taxes.

AT&T finance chief Pascal Desroches said the telecom giant is urging lawmakers to keep the corporate tax rate low to make the U.S. more internationally competitive. “It’s important for the right incentives to be in place,” he said. “But in the end, if we’re forced to operate in an environment where the tax rates are higher, we’ll navigate it just like everybody else.”

Several business leaders and Capitol Hill aides say they expect the tax-rate increase to be to 25%. Mr. Biden last month discussed a lower increased rate with a bipartisan group of lawmakers, and he has since said he is open to negotiation.

Jonathan Gray, president of investment firm Blackstone Group Inc., said the impact of corporate tax changes will depend on how far the Biden administration goes. “If we talk about corporate rates that go from 21 to 25 [percent] I’m not sure that has as much of a major difference,” he said during a Wall Street Journal event last week. “My guess is it’ll probably be something below the original proposals and a strong economy will enable us to power through.”

The current tax rate was established under the 2017 tax law. The Biden team, including National Economic Council Director Brian Deese, has been reminding executives that the new proposed rate is still below the 35% that existed before that legislation signed by former President Donald Trump.

Business leaders are now looking to Republican allies in Congress. Last month a group of senators released the outline for a $568 billion infrastructure plan that calls for collecting user fees for electric vehicles and repurposing existing federal spending, while opposing tax increases on companies.

Republicans have characterized it as a starting point for negotiations—Democrats generally view the proposal as too modest—and the White House said it welcomed the discussion. Business groups do, too.

“For anyone who sincerely wants to see a bold and responsible infrastructure plan finally enacted into law, there is only one path forward: bipartisan negotiations,” said Neil Bradley, executive vice president of the U.S. Chamber of Commerce.

If Mr. Biden can’t win over Republicans, Democrats will likely attempt to use a budget process called reconciliation. That avoids the Senate’s 60-vote threshold for advancing most bills, but could limit what is in the plan.

Former Republican House Majority Leader Eric Cantor, now vice chairman of investment bank Moelis & Co., said he doesn’t expect bipartisan support if the plan includes tax increases. Republicans have derided the size and scope of Mr. Biden’s plan and are solidly against raising corporate taxes.

“When there’s a signal that taxes are going to go up, you therefore are going to have a lower return on investment and you’re going to have less investment,” said Mr. Cantor, who now advises corporate clients on matters including public policy. “Coming out of a pandemic, that is not what we in America should be after.”

Mr. Biden said his only restriction on paying for the package is raising taxes on those making less than $400,000, but he said he expects corporate America to do its share.

Cedric Richmond, the White House public engagement director, has also been in touch with a number of companies, including JPMorgan Chase & Co. and Duke Energy Corp. , to make the case for a corporate tax increase.

“All we’re saying is these investments are going to benefit business competitiveness and help us win the future,” he said. “We think business should share in that investment.”

—Peter Loftus and Drew FitzGerald contributed to this article.

Write to Alex Leary at [email protected] and Emily Glazer at [email protected]