Although President Joe Biden’s $2.7 trillion American Jobs Plan proposes paying for infrastructure investments through corporate tax hikes, a panel of transportation specialists said user-based fees are a better solution.
During a webinar earlier this month hosted by the Committee for a Responsible Federal Budget, panelists said options like a vehicle miles traveled (VMT) fee, the existing gas tax and a carbon tax could raise the money needed to pay for the infrastructure bill. Raising corporate taxes, they said, could stifle growth and innovation.
According to Jeff Davis, senior fellow at the Eno Center for Transportation, Biden’s American Jobs Plan includes funding in four areas: $812 billion for infrastructure, $680 billion for other federal investments, $398 billion for physical capital expenditures, and $400 billion for seniors and caregivers.
Of the $812 billion for infrastructure, he said, just $456 billion would be spent on transportation. The bill also includes investments totaling $111 billion for drinking and wastewater, $100 billion for broadband, $100 billion for power and the electric grid, and $50 billion to build in resiliency for those systems.
Within the $456 billion for transportation, the bill would spend $115 billion on highways, $80 billion on intercity rail, $44 billion on mega projects, $17 billion on ports, $20 billion on road safety, $25 billion on equity, $110 billion on mass transit, $15 billion on electric vehicle charging stations and $5 billion on resilience grants.
Davis said the majority of the money spent on intercity rail would be directed to Amtrak and the Northeast Corridor. Only $20 billion of the rail budget would be allocated for non-Amtrak projects, he said.
Chye-Ching Huang, executive director of the Tax Law Center at NYU Law, said it appeared the bill would be paid for over the next 15 years, using an increase in the tax rate for corporations. The bill would effectively reverse the corporate tax cuts put in place by the Trump administration in 2017 and raise the corporate tax rate to 28 percent.
Also in the plan is a directive to strengthen the Internal Revenue Service.
“The plan would provide the IRS with resources to pursue corporations that don’t meet their tax obligations,” Huang said. “Hopefully, that will involve mandatory funding to audit corporations as they do individuals.”
Robert Atkinson, founder and president of the Information Technology and Innovation Foundation, said he liked the plan but that it didn’t go far enough. The country should be spending $30 billion more on roads than it currently is, he said, and the Biden proposal instead is spending five times more on transit.
Atkinson advocated for a user-based pay system.
“I think paying for this through a tax on corporations is a mistake,” he said. “It should be based on a user pay system. The question is, ‘Is a gas tax a viable way to do that?’ Of course it is… I’ve long argued that we should move to a vehicle miles traveled tax, however. That is the way I would pay for it.”
Adele Morris, senior fellow in Economic Studies and the policy director for Climate and Energy Economics with the Brookings Institution, offered that a carbon tax would also not only help pay for infrastructure spending, but also be an alternative way to reduce carbon emissions.
“A carbon tax could fit very sensibly within an infrastructure bill,” she said. A carbon tax would tax the amount of carbon-based emissions from a vehicle by weight.
While viewers of the webinar voiced concerns about VMT over privacy issues, the burden the tax would place on low-income users, and how governments would differentiate between corporate and individual users, Atkinson said those concerns were unfounded.
“Any system that we would design would be required to be a one-way receiver of GPS information,” he said comparing any VMT monitoring device to a cell phone with GPS. Additionally, he said, no private information would be transmitted and any information about the number of miles traveled obtained would be deleted after the bill was paid.
Also, higher-income drivers, he said, tend to drive more than low-income drivers.
Atkinson suggested a platform that could have layers added to it. For instance, if a city has a VMT, it could layer it on to the platform, and if there is a carbon tax, it would only layer it onto vehicles that emit greenhouse gases.
While Davis questioned the ability of the IRS to administrate a system that would essentially be taxing more than 220 million vehicles, Atkinson said the system would likely be totally automated, eliminating the need for a huge increase in the IRS’ labor force.
Davis said it was unlikely that the entire plan would be voted for under a budget reconciliation process.
“Because the Highway Trust Fund has gotten itself into a weird budgetary no man’s land over the years, there’s not much that can be done to fit the Highway Trust Fund into a reconciliation bill… There’s a lot of surface transportation items that are going to have to be legislated separately.”