BEYOND THE NUMBERS
This week is the sixth annual National Infrastructure Week, a bipartisan event designed to draw attention to the severe need to rebuild the nation’s infrastructure. Policymakers appear unlikely to act this year. Worse, the 2017 tax law diverts funds that policymakers in both parties had previously recommended using for infrastructure and uses them instead for corporate tax cuts.
In crafting the 2017 law, policymakers had to decide what to do about the $2.6 trillion in profits that U.S.-based multinationals have booked offshore, largely in tax havens like Bermuda, where they faced little or no foreign taxes and could indefinitely avoid U.S. corporate taxes. Before 2017, both Republican and Democratic policymakers had proposed imposing a one-time, mandatory tax on those profits as part of a transition to a new international tax system and using the revenues for infrastructure:
- President Obama proposed a one-time, 14 percent tax on multinationals’ existing offshore profits to finance infrastructure investments.
- Former House Ways and Means Committee Chairman Dave Camp’s (R-MI) 2014 tax reform proposal included a transition tax at a maximum rate of 8.75 percent on most foreign profits, which he said would be dedicated to the Highway Trust Fund.
- A bipartisan group of senators led by Finance Committee Republican Rob Portman (R-OH) and Chuck Schumer (D-NY), who is now the Senate Democratic Leader, proposed a framework that endorsed a transition tax to invest in transportation infrastructure.
The 2017 tax law, which President Trump and congressional Republicans enacted on a partisan basis, includes a one-time tax on existing foreign profits. But instead of devoting the $339 billion this tax will raise between 2018 and 2027 to much-needed infrastructure investments, the 2017 law uses it to temporarily cover some of the cost of its deep, permanent cut in the corporate rate.
Improving the nation’s infrastructure and addressing the severe shortage of affordable housing would be far more equitable ways to use those resources than giving profitable corporations a massive tax cut, which will flow overwhelmingly to wealthy shareholders and CEOs. Accordingly, Senate Democrats have proposed to undo some of the corporate tax cuts to fund infrastructure, which would do more to boost wages, jobs, and economic growth.
The President’s infrastructure plan, meanwhile, is largely a mirage and won’t address the nation’s infrastructure needs. Though touted as providing $1.5 trillion in new investment, it relies on states, localities, and private individuals to provide about $1.3 trillion of the total. And even the $200 billion in “new” federal funds don’t take into account that the President’s 2019 budget cuts Highway Trust Fund spending over time, cuts mass transit, ends the Transportation Department’s TIGER program (which supported some of the most innovative local infrastructure projects over the last eight years), and cuts investment for new projects at the Army Corps of Engineers.