DALLAS — A bipartisan proposal for national infrastructure bank funded by $50 billion of 50-year taxable bonds is a bad idea that should be killed by Congress, according to the chief tax expert at the Economic Policy Institute.
The federal government would rack up a corporate tax revenue loss of at least $70 billion and possibly as much as $100 billion with the plan, said Thomas Hungerford, chief economist and director of taxes and budgets at the nonprofit think tank in Washington.
The proposal contained in identical bills filed in the House and Senate would fund the infrastructure bank with federal bonds bearing 1% interest. Multinational corporations could repatriate up to $6 of foreign earnings to the United States with no tax liability for every $1 of bonds they purchased.
More money is needed for transportation infrastructure but Congress would save by capitalizing the proposed bank with $50 billion appropriated from the general fund, Hungerford said.
"With millions of people out of work and our nation's roads and bridges crumbling, an infrastructure bank makes perfect sense, but these bills are not a smart deal for the American people," Hungerford said in a policy memo called "How Not To Fund An Infrastructure Bank" that was released Monday.
"The federal government would get some money now, but would lose more over the long term. Meanwhile, multinational corporations get a nice tax break," he said. "We would be better off simply financing a bank through direct appropriation."
The capitalization might not reach $50 billion from the 1% bonds, Hungerford said, unless the repatriation ratio reaches at least 4:1.
A bipartisan group of 11 U.S. senators and 50 House members are sponsors of the proposed national infrastructure bank bill.
The Partnership to Build America Act introduced Jan. 17 in the Senate would leverage the $50 billion of bond proceeds to provide up to $750 billion of loans and loan guarantees to states and local governments for transportation, energy, education, communications, and water infrastructure projects.
The Senate measure, S.1957, coincides with the House's H.R. 2084, filed in May by Rep, John Delaney, D-Md. The Senate version was introduced by Sen. Michael Bennett, D-Colo., with Sen. Roy Blount, R-Mo., as the chief co-sponsor.
At least 25% of the projects financed through the proposed infrastructure bank must be public-private partnerships, with at least 20% of a P3 project's financing coming from private capital.
Delaney said the analysis of his bill was flawed because it assumes that the corporations' overseas profits eventually will be taxed at current levels "even though the owners of those monies have filed tax returns and said publicly that they have no intention of bring the money back to the United States."
The Partnership to Build America Act is the most bipartisan piece of economic legislation in Congress, Delaney said.
"There will always be arguments that we are better off with the status quo," he said. "I just don't believe they are supported by the facts."
The national infrastructure bank will create millions of jobs, Delaney said, and reduce the financial strain on state and local governments.
"That's why so many Republicans and Democrats have broken the mold and joined together on this bill," he said.
Meanwhile, bad news continued over the ability of the Highway Trust Fund to provide federal funding for surface transportation with a new report from the Congressional Budget Office concluding that a six-year highway bill would require a transfer of $100 billion from the general fund.
The CBO report said without the transfer, the HTF would have a revenue shortfall of $13 billion in fiscal 2015 due to a decline in gasoline tax collections. The cumulative shortfall would total $95 billion in fiscal 2020 and $113 billion in fiscal 2021.
The U.S. Department of Transportation said it must have cash balances $4 billion in the highway account and $1 billion in the transit account to meet obligations, CBO noted.
"As a result, under CBO's baseline projections, the highway account may have to delay some of its payments during the later half of 2014," CBO wrote in the report.
