Delaney: Trump Tax Plan a Punch in the Gut on Infrastructure
WASHINGTON – Today the Trump Administration unveiled the outlines of their tax reform proposal, which included major changes for both individuals and corporations. The White House plan did not include using revenues from international tax reform to rebuild infrastructure. Pairing international tax reform and infrastructure was first proposed by Congressman John K. Delaney (MD-6) four years ago and has received significant bipartisan support since 2013.
Congressman Delaney releases the following statement:
“President Trump’s tax plan will explode the deficit and disproportionally benefit wealthy Americans. As someone who has spent decades in the private sector and understands how the economy actually works, I believe that President Trump’s tax plan will significantly hurt our long term fiscal health and economic competitiveness. Strategically, this is a strong sign by President Trump that they’re not serious about infrastructure, it’s a punch in the gut on infrastructure, frankly. Today the White House essentially announced they aren’t doing infrastructure. After working on this issue for four years, it is clear to me that the only way you can pay for a real infrastructure program is by using revenues from repatriation. It’s a shame because the framework is here for a legitimately bipartisan deal and we’ve got two good bills in the House that could pass tomorrow.”
In March, Congressman Delaney reintroduced the Infrastructure 2.0 Act and the Partnership to Build America Act, with Congressman Ted Yoho (FL-3) and Congressman Rodney Davis (IL-13) as the Republican lead cosponsors. Congressman Delaney has also written to President Trump, Treasury Secretary Steven Mnuchin and Chief Economic Advisor Gary Cohn urging them to adopt this framework.
The Partnership to Build America Act (H.R. 1669)
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 (H.R. 1670)
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.