Delaney: Trump’s Hypocrisy on Infrastructure is Astounding
WASHINGTON – President Trump’s budget proposal includes major cuts in infrastructure investment, cutting the Department of Transportation’s budget by 13%. The White House proposal eliminates the Transportation Investment Generating Economic Recovery (TIGER) grant program entirely, a $499 million dollar reduction in America’s infrastructure investment. Trump’s proposal also cuts infrastructure investment in rural airports and rail.
Later this month Congressman John K. Delaney (MD-6) will reintroduce two pieces of bipartisan legislation to rebuild America’s infrastructure using revenues from international tax reform, the Partnership to Build America Act and the Infrastructure 2.0 Act.
“President Trump’s hypocrisy on infrastructure is astounding,” said Congressman John K. Delaney (MD-6). “Less than a month ago the President talked about building gleaming new infrastructure, but when it comes time to put up or shut up, we see cuts, not anything signaling new investment. Instead of pulling a bait-and-switch on the American people, the President should embrace the only real bipartisan solution that exists, our plan to use international tax reform to rebuild America.”
During the last two Congresses, over 40 Democrats and 40 Republicans have cosponsored Delaney legislation to fund and finance new infrastructure investment using revenues from repatriation. Delaney is a Co-Chair of the New Democrat Coalition’s Task Force on Infrastructure.
The Partnership to Build America Act
The American Infrastructure Fund
- The Partnership to Build America Act creates the American Infrastructure Fund (AIF) to provide financing to state and local governments for new infrastructure.
- Transportation, energy, communications, water and education projects are eligible to receive AIF financing. Local governments would apply directly to the AIF for support.
- To encourage public-private partnerships 35% of AIF supported projects must have at least 10% of their financing be private debt or equity.
- The AIF will be capitalized by $50 billion in infrastructure bond sales and leveraged at a 15:1 ratio to provide up to $750 billion in loans or guarantees.
Funded by an Infrastructure Bond Sale
- Rather than using appropriated funds out of the federal budget to establish the American Infrastructure Fund, the Partnership to Build America Act uses a bond sale.
- AIF bonds would have a 50-year term, pay a 1% fixed rate return and would not be guaranteed by the U.S. government. These bonds are not intended to be a good investment on their own and are transferable after purchase.
- To incentivize companies to purchase these bonds, U.S. companies would be allowed to repatriate a certain amount of their overseas earnings tax free for every $1.00 they invest in the bonds. This multiplier will be set by a “reverse Dutch auction” – which allows the market to set the rate, ensuring that enough funds are raised.
- Assuming a 1:4 ratio is set by the auction; a company will be able to repatriate $4.00 tax-free for every $1 in AIF bonds they purchase.
The Infrastructure 2.0 Act
Building a World Class 21st Century Infrastructure with Revenue from Deemed Repatriation at 8.75% Tax Rate
- Under the Infrastructure 2.0 Act, existing overseas profits accumulated by U.S. multi-national corporations would be subject to a mandatory, one-time 8.75% tax, replacing deferral option and current rate of 35%.
- $120 billion to the Highway Trust Fund, enough to meet funding gap at increased levels for six years.
- $50 billion to capitalize the American Infrastructure Fund (AIF)
- $25 million pilot program to create regional infrastructure accelerators, similar to the West Coast Infrastructure Exchange
- This frees the estimated $2 trillion in overseas earnings to return to the United States, spurring private sector re-investment and growth.
Creating Long-term Highway Trust Fund Solvency and Policy Certainty
- The Infrastructure 2.0 Act provides six years of Highway Trust Fund solvency, providing immediate certainty to the private sector and policymakers.
- The legislation also establishes a bipartisan and bicameral commission that is tasked with developing a solution for permanent solvency of the Highway Trust Fund.
Building a Path for Broader Tax Reform
- The Infrastructure 2.0 Act creates an eighteen-month deadline for international tax reform.
- To encourage action, the legislation includes a forcing function: if reform is not enacted, a fallback international tax package to make U.S. business climate more competitive would be implemented.
- This pro-growth fallback reform package would end deferral, reduce anti-competitive over taxation, decrease taxes for companies paying fair rates abroad but increase taxes for companies in tax havens. This would eliminate the lock-out effect and allow for the free flow of profits back to the United States.
- Under this option, for Active Market Foreign Income, a company would pay a 12.25% tax to the U.S. on overseas profits if they are currently paying no tax and a 2% tax to the U.S. if they are already paying the OECD average of 25% abroad, with a sliding scale in-between.