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Wealthy businesses and people got huge tax cuts from Trump and the GOP. They're prime beneficiaries of strong infrastructure and must contribute more.
In a city polarized by political differences, there is amazing unanimity in Washington over the sad state of the nation’s infrastructure and the urgent need to address it. The question is how to pay for it.
The American Society of Civil Engineers gives U.S. infrastructure a barely passing grade of D+. The group estimates it will take $2 trillion on top of current levels of spending to bring it all up to snuff.
President Donald Trump and Democratic congressional leaders agreed last month to invest that same amount to restore, rebuild and expand crumbling infrastructure, from roads, bridges, schools and waterworks to airports, the electrical grid, rural broadband and, we would hope, more clean renewable energy sources to mitigate against climate change.
Now Trump, House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer are meeting again this week to discuss where to get the money. So, what about raising taxes? There's simply no other choice.
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The wealthy and big corporations, which received massive tax breaks from the 2017 Trump-GOP tax cuts and are prime beneficiaries of a strong infrastructure system, need to contribute more and start paying their fair share.
Republican double standard on spending
Other funding sources are inadequate. Raising the federal gas tax (or replacing it with a mileage-based user fee) could be part of the answer, but it’s a diminishing resource because of the growing use of electric and other fuel-efficient vehicles. Even tripling the gas tax to 53 cents a gallon would raise just over $500 billion over 10 years, a quarter of what’s needed.
What’s more, does it really make sense to ask working families to pay a lot more to get to work or go on vacation after most of those Trump-GOP tax cuts benefited the wealthy and corporations?
Public-private partnerships, or P3s, which use federal spending to leverage private investment capital, were considered by both the Obama and Trump administrations. But according to Rep. Peter DeFazio, D-Oregon, chairman of the House Transportation and Infrastructure Committee, only about 12% of infrastructure projects can generate the needed revenue (mostly through tolls and fees) to attract private investment. And again, asking working families to pay more to provide long-term guaranteed profits for big corporations and Wall Street is unfair.
Republicans weren’t bothered by the nearly $2 trillion cost of their tax cut bill, which was added to the federal debt. But they now display a striking double standard by objecting to spending the same amount to fix our infrastructure.
More galling: A 2012 analysis by Mark Zandi at Moody’s Analytics shows that every dollar spent oninfrastructure pumps $1.44 back into the economy, while a dollar spent on corporate tax cuts returns just 32 cents.
Keep these tax hike options on the table
Senate Democrats proposed their own $1 trillion infrastructure plan last year, funded entirely by fixing parts of the Trump-GOP tax cuts that give away too much to the rich and corporations.
Our organization, Americans for Tax Fairness, recently released a report detailing about 40 options for closing loopholes and asking the wealthy and big corporations to pay more, money that could be dedicated to infrastructure. The options include:
Assessing an annual tax on extreme wealth. Sen. Elizabeth Warren, D-Mass., has proposed an “Ultra-Millionaire Tax” of 2% on the portion of a household’s net worth exceeding $50 million, and a 3% tax on the portion exceeding $1 billion, which could raise $2.75 trillion over a decade.
Taxing wealth more like work. We should end the loophole that taxes investment income from stocks (capital gains) at a top rate of 20% and taxes salaries at a top rate of 37%. Reforms to the capital gains tax rate, including matching the rate for wages and salaries and taxing capital gains at death, could raise up to $2.4 trillion.
Placing a surtax on super high incomes. A 10% surtax on the portion of a couple’s income that's above $2 million could raise up to $850 billion over a decade.
Making corporations pay more. Their income tax rate should be higher than the25% proposed by Senate Democrats. Every 1 percentage point increase raises $96 billion over 10 years, the Congressional Budget Office said last year. So restoring the 2017 rate of 35% would raise more than $1.3 trillion.
Taxing Wall Street trades. A tax of just 10 cents on every $100 in trades could raise $777 billion, according to the Joint Committee on Taxation. It would also slow the high-frequency trading of stock market speculators that destabilizes markets for long-term investors.
These are just a few options available to raise the needed revenue, and there are many others. But if all of them are taken off the table, as Republicans have suggested, revitalizing the nation’s infrastructure is doomed. It simply won’t happen.
Democratic congressional leaders are prepared to hear the president’s funding proposals at their scheduled meeting Wednesday. I’m optimistic, but only as long as higher taxes on the wealthy and big corporations are the foundation of the plan.
Frank Clemente is executive director of Americans for Tax Fairness. Follow him on Twitter: @clemente_frank
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