Delaney on Senate Infrastructure Proposal: The Key is How We Pay for It
WASHINGTON – Today, Senate Democrats announced a comprehensive infrastructure plan funded by direct federal spending. For the last four years, Congressman John K. Delaney (MD-6) has been the leading advocate in Congress for using revenues from international tax reform to pay for rebuilding America’s infrastructure. Congressman Delaney has introduced two bills that have generated broad bipartisan support, drawing over 40 Republican and 40 Democratic cosponsors in the House and Senate since 2013.
“We all want infrastructure improvements, the real issue is how to pay for it in a way that can get the bipartisan support needed to become reality,” said Congressman Delaney. “The best solution is to use revenues from international tax reform, bringing back money being held overseas to rebuild America. I am encouraged by the Senate proposal, which includes both funding and financing, and am interested in seeing further details on how it is paid for. We have a Republican-led government, but infrastructure will need Democratic votes, so the key now is finding a way to get to a bipartisan bill and after meeting with hundreds of members of Congress over the last four years on this issue, I am convinced the best way to get this done is through international tax reform.”
This spring, Congressman Delaney and Congressman Davis will re-file The Partnership to Build America Act, legislation that creates a new American Infrastructure Fund (AIF) to finance state and local projects. Congressman Delaney and Congressman Yoho will re-file The Infrastructure 2.0 Act, legislation that includes the AIF and provides additional long-term revenues to stabilize and expand the Highway Trust Fund.
The Partnership to Build America Act – To Be Introduced by Rep. Delaney & Rep. Davis
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 – To Be Introduced by Rep. Delaney & Rep. Yoho
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.