Tap Every Source for Infrastructure Funds
After all the hosannas about infrastructure’s importance, it’s unsettling how quickly faith falters when it comes to paying. For a future where we have a thriving, viable infrastructure-supported economy, the best idea is to pay for it using every means we can think of. That includes corporate income taxes and gas taxes to meet the demands of the moment and adding clauses to the legislation to create new sources of revenue, such as a coordinated vehicle-miles- traveled initiative and an infrastructure bank.
The Biden administration’s infrastructure plan would cost about $2 trillion and proposes increasing the corporate tax rate halfway back to its level before the 2017 tax cut, raising it from 21% to 28%. In theory, that would cover costs over an eight- to 10-year span.
Few believe that the national economy and growing payrolls and employment would shrink dramatically and collapse under the weight of a 28% corporate tax rate.
Republicans are reportedly preparing a $600-billion infrastructure counter-proposal, without the administration’s inclusion of numerous non-infrastructure items, such as elder care. That plan certainly will involve no corporate tax increase. Stripping away the non-infrastructure features is useful truth in packaging.
We don’t think the Biden administration’s proposed corporate tax increase is out of line. A better idea for Republicans would be to propose a lesser tax increase, not a zero increase, if they are serious about solving real-world problems rather than wrapping themselves in an anti-tax banner. Few believe that the national economy would shrink dramatically and collapse under the weight of a 28% corporate tax rate. Nor would it harm recovery of pandemic-crippled industries, such as travel, which was doing well when the tax rate was 35% only a short while ago.
One persistent problem is the Highway Trust Fund. Since 2008, Congress has propped it up with more than $150 billion in transfers from the general fund. It will dwindle further as electric vehicles and fuel-efficient cars proliferate. The construction and engineering coalition is wise to call for Congress to leverage the progress made in individual states to date and create a comprehensive national vehicle-miles-traveled program to replace motor fuel taxes and fees. But that will take years to put in place. And other types of user fees are even more complex, if applicable at all. How such fees could ever be assessed for water and wastewater systems or broadband service is unclear—so user-fees have limited potential.
There are many ways to think about the funding debate. One is to consider the transformational infrastructure program some envision in the fight against climate change—an existential issue. Another is to see the viability of our water and power supplies as national security issues. Aren’t those reason enough? Put another way, if there’s a strong case that infrastructure is mainly a state and local issue without need for federal funds and leadership, no one has successfully argued that position. Leaving a federal infrastructure bill unpassed in 2021 would be an act of national negligence.
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