Rep. John Delaney, R-Md., this week filed two bipartisan bills that would fund the rebuilding of ailing U.S. transportation infrastructure with revenues from a one-time bond sale to U.S. corporations and long-term international tax reform.
U.S. House Rep. John Delaney, R-Md., this week introduced two bipartisan bills to rebuild ailing transportation infrastructure and fix the country’s “broken tax code,” according to a statement from Delaney’s office.
The first bill, cosponsored by Rep. Rodney Davis, R-Ill., would create a new American Infrastructure Fund (AIF) to finance state and local transportation infrastructure projects with revenues from a one-time bond sale to U.S. corporations “looking to repatriate a portion of their international earnings.”
Under the proposed Partnership to Build America Act, transportation, energy, communications, water and education projects would all be eligible to receive AIF financing, with local governments applying directly to the fund for support. Capitalized by $50 billion in infrastructure bond sales leveraged at a 15:1 ratio, the AIF would provide up to $750 billion in loans or guarantees, according to Delaney.
To encourage public-private partnerships, 35 percent of AIF supported projects would be required to have at least 10 percent of their financing come from private debt or equity.
The 50-year AIF bonds would pay a 1 percent fixed rate return, but would not be guaranteed by the U.S. government, as they are “not intended to be a good investment on their own and are transferable after purchase.”
To incentivize firms to purchase them, U.S. companies would be allowed to repatriate a certain amount of their overseas earnings without paying taxes on them for every dollar they invest in the AIF bonds. The multiplier would be set by a “reverse Dutch auction,” which allows the market to set the rate and ensures enough funds are raised.
If the auction sets the ratio at 1:4, for example, a company will be able to repatriate a $4.00 tax free for every $1 in AIF bonds they purchase.
In addition, Delaney and Rep. Ted Yoho, R-Fla., have introduced the proposed Infrastructure 2.0 Act, which would also create the AIF, as well as provide additional revenue to the Highway Trust Fund (HTF) via more comprehensive international tax reform. Delaney first proposed combining international tax reform and infrastructure funding in 2013.
The legislation would mandate that existing overseas profits accumulated by U.S. multi-national corporations be subject to a one-time 8.75 percent tax, replacing the deferral option and current rate of 35 percent.
The Infrastructure 2.0 Act would inject an estimated $120 billion to the HTF, enough to meet funding gap at increased levels for six years, provide roughly $50 billion to the AIF, and create a $25 million pilot program to create regional infrastructure accelerators, similar to the West Coast Infrastructure Exchange.
In addition, the bill would establishes a bipartisan and bicameral commission tasked with developing a solution for permanent solvency of the HTF, which currently only brings in about $34 billion annually, compared with the $50 billion the government spends each year on transportation projects.
The roughly $16 billion per year shortfall has led Congress to bail out the HTF with more than $40 billion from the Treasury over the past seven years – money that necessarily comes from borrowing or diversion from other programs.
The Infrastructure 2.0 Act also creates an 18-month deadline for international tax reform. 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,” according to Delaney’s office. “This would eliminate the lock-out effect and allow for the free flow of profits back to the United States.”
Under this option, firms would pay a 12.25 percent tax to the U.S. on overseas profits if they are currently paying no tax and a 2 percent tax if they are already paying the OECD average of 25 percent abroad, with a sliding scale for those companies that fall between the two.
“Our infrastructure solution delivers a triple bottom-line: it creates good-paying jobs, boosts our long-term economic competitiveness and improves the quality of life of millions of people,” Delaney said. “There is a lot of interest on both sides of the aisle in infrastructure and our solution bridges the partisan gap.
“Our broken tax code and our crumbling infrastructure are two problems that are dragging down productivity and economic growth and tackling these two problems at once would be completely transformative for our long-term trajectory,” he said.
“If our country is going to invest in infrastructure and spur job creation, we need innovative, bipartisan funding solutions like this legislation that brings public and private entities together to leverage more investments,” added Davis. “Local governments in my district are always looking for opportunities to advance new projects and fix their infrastructure, but too often they come up short because of a lack of funding from Washington.”
“Infrastructure 2.0 is a common sense bill that repatriates overseas profits at 8.75 percent, creates jobs, and improves our nation’s infrastructure,” said Yoho. “By bringing those profits home, in addition to funds already appropriated, it will bolster the Highway Trust Fund.
“Along with the Partnership to Build America Act, it will create a new investment bank for our towns and cities. This will allow them to leverage private funds to repair our neglected infrastructure. By doing this, we will be able to bring our crumbling infrastructure into the 21st century.”
House Reps introduce dual infrastructure bills
