DALLAS – A $1 trillion, 10-year infrastructure renewal plan
The linchpin of Trump's "American Infrastructure First" plan would be $137 billion of tax credits that Congress would be asked to authorize if he is elected president. The credits could be used by investors to leverage $167 billion in private funds, said Trump advisors Wilbur Ross and Peter Navarro.
The tax credits would lower the total cost of financing a project by as much as 20%, they said.
The tax credits would be available only to projects, such as toll roads, toll bridges, and airports, with revenues that would be attractive to private investors, said Navarro.
"Trump's plan will harness market forces to help raise construction funds by incentivizing private sector investors through tax credits, thereby revolutionizing American infrastructure finance," Navarro said.
Conventional municipal financing would be available for projects that lack a revenue stream, he said.
"You've got existing money that comes into all sorts of funds like transportation funds, and then you have bonds that have been sold for specific projects," Navarro said. "That will continue to be done."
Companies taking advantage of the tax credits would be able to borrow money on the private market at low interest rates to finance $1 trillion of projects without the need for any new taxes, Ross and Navarro said.
Investors that put up 17% of each project's cost as "skin in the game" would receive tax credits equaling 82% of the equity funds invested, according to the plan's authors. Private sector lenders would provide the remaining financing.
The $137 billion of federal tax credits would be offset by the incremental payroll taxes paid by construction workers on the projects and Trump's lower, 15% business tax rate on contractors and suppliers, "which will generate massive new tax revenues," Ross and Navarro said. "Trump would also quickly cut through any unnecessary bureaucratic red tape delaying projects and complete them faster and at lower cost," they said. "It would be handled by the private sector so there would be no sweetheart deals for politically connected people."
Companies would be able to bring overseas earnings back to the U.S. at Trump's proposed reduced tax rate of 10% rather than the current 35%. With the credits, companies could avoid any tax liability by investing $122 million of the repatriated profits in infrastructure projects, Ross and Navarro said.
Democratic presidential candidate Hillary Clinton's proposal for $275 billion of additional infrastructure spending would in fact worsen the nation's infrastructure deficit, Ross and Navarro said. Clinton's plan includes a national infrastructure bank capitalized with $25 billion over five years that she said would leverage another $225 billion in private investments.
The Democratic plan substitutes inefficient government spending for the more efficient private sector investment in the Trump proposal, they said.
"Hillary Clinton proposes to finance $500 billion worth of new infrastructure spending over five years by levying stiff new business taxes and creating a national infrastructure bank that will introduce high-risk, sub-prime lending to the government. It's a fool's errand," Ross and Navarro said.
Trump's infrastructure funding plan relies almost exclusively on new incentives for private investors to generate additional infrastructure funding, said Robert Puentes, president of the Eno Center for Transportation. He noted that Clinton said the additional expenditures in her plan would be funded through unspecified business tax reforms.
"Sen. Clinton's plan focuses more on infrastructure broadly and on what the impacts of that infrastructure would be on people, places, and communities," Puentes said.
