Trump: Advancing Tax Incentives and Public-Private Partnerships

President Elect Trump has vowed to work with Congress on an ambitious $1 trillion, 10-year proposal staked on tax incentives and private investment to stimulate jobs and rebuild highways, bridges and airports within his first 100 days in office.

To pay for large-scale infrastructure projects, the president-elect is seeking to entice the private sector to get on board with putting up $167 billion of the proposed $1 trillion investment in public-works projects by having the government offer them an 82 percent tax credit.

The plan also relies on increased tax revenues from two revenue streams generated from the new infrastructure projects to offset the tax expenditure: additional wage income from construction workers and contractor profits. Advancing Tax Incentives and Public-Private Partnerships

Trump has vowed to work with Congress on an ambitious $1 trillion, 10-year proposal staked on tax incentives and private investment to stimulate jobs and rebuild highways, bridges and airports within his first 100 days in office.

To pay for large-scale infrastructure projects, the president-elect is seeking to entice the private sector to get on board with putting up $167 billion of the proposed $1 trillion investment in public-works projects by having the government offer them an 82 percent tax credit. The plan also relies on increased tax revenues from two revenue streams generated from the new infrastructure projects to offset the tax expenditure: additional wage income from construction workers and contractor profits.

It is estimated that $300 billion or more in private capital is ready to be deployed for this purpose. This estimated sum exists as investors like pension funds, insurance companies and private equity believe deploying their capital towards infrastructure makes for a sound investment backed by the strength and integrity of local and state governments.

Thus, Trump’s proposal could provide significant and long-awaited opportunities for public-private partnerships, or P3s, to invest in major, high-cost, revenue-supported projects.

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Commentary on Debate: How to Fix America’s Infrastructure

Monday night’s presidential debate included some instructive moments even for their repetitiveness; other moments were mere distracting distortions.

We have been writing about the need to upgrade America’s infrastructure it seems almost weekly. But only tangentially was the issue raised during the debate. Donald Trump, among his bill of particulars defining the trouble the Obama administration has ushered in over the past eight years, mentioned the sorry state of U.S. airports and compared them unfavorably to similar facilities in Asia.

“Our airports are like from a third-world country. You land at LaGuardia, you land at Kennedy, you land at LAX, you land at Newark and you come in from Dubai and Qatar and you see these incredible — you come in from China — you see these incredible airports and you land — we’ve become a third-world country,” Trump observed.

As Kim Day, the CEO of Denver International Airport, noted in an Op-Ed forThe Denver Post on the 20th anniversary of the local airport’s opening: “DIA is an economic powerhouse for Colorado, growing its initial annual economic impact of $3.1 billion to an estimated $26.3 billion in 2013. The airport supports nearly 190,000 jobs, and is on track to be even more impactful in the years to come.”

It’s not a perfect picture, of course, as cost overruns for project expansions, including a new train station and a hotel, well illustrate.

Nevertheless, a decision made 27 years ago to spend more than $2 billion on a new airport — the only major new one built in the U.S. since 1974 — has helped diversify Colorado’s economy and spurred broader growth.

Airports are certainly one area in which we can use an upgrade. We also need more and newer bridges, roads, and tunnels. And we need to upgrade the electrical grid. And we need to improve and update our port facilities.

The problem with the United States’ infrastructure is much broader than failing airports and bridges. The nation’s roads are congested and full of potholes. In 2014, the typical urban commuter spent 42 hours stuck in traffic, up from 20 hours in 1984. Americans consumed over three billion gallons of gas as they sat in grid­lock for almost seven billion hours, at a cost of $160 billion in wasted fuel and time.

Hydration is absolutely essential, and yet we continue to ignore the state of the infrastructure that delivers it to us. In its 2013 Report Card for America’s Infrastructure, the American Society of Civil Engineers gave our “drinking water” assets a “D.”

According to Professor Robert Glennon of the University of Arizona:

Our water infrastructure consists of approximately 54,000 drinking water systems, with more than 700,000 miles of pipes, and 17,000 wastewater treatment plants, with an additional 800,000 miles of pipes. A 2012 report of the American Water Works Association concluded that more than a million miles of these pipes need repair or replacement. That’s why communities across the nation suffer 240,000 water main breaks per year. The major cause of pipe failure is age.

Disease and death follow from poorly conceived and maintained water infrastructure.

The root of the crisis is clear: the United States has underinvested in its infrastructure. The federal gas tax is the main source of federal funding for roads, bridges, and subways. But Washington has not increased that tax, of 18.4 cents per gallon, since 1993; in real terms, its value has thus fallen by over 40 percent. Expert groups such as the American Society of Civil Engineers, business associations such as the U.S. Chamber of Commerce, and unions such as the AFL-CIO have all called for trillions of dollars of new investment. But Washington has failed to act.

The problems that plague American infrastructure are deep-seated and complex. Yet there is a way out. Washington and the public must recognize that world-class infrastructure does not come cheap. High-quality infrastructure is vital to global economic competitiveness, and the United States is falling behind. The United States invests less than two percent of its GDP in infrastructure; Europe, by contrast, invests five per­cent. Furthermore, the bureaucratic system that oversees public infrastructure spending has become hopelessly “siloed,” with separate agencies at each level of government dedicated to different modes of transport. Each has its own stakeholders, champions, and opponents. It’s a wasteful, inefficient system. Henry Petroski, a professor of civil engineering and history at Duke University in his book “The Road Taken”, claims reforming it will require several steps.

Firstly, governments should eliminate silos. A unified department should merge the federal highway, transit, aviation, maritime, and railroad administrations; the Army Corps of Engineers, which controls investment in ports; and the Environmental Protection Agency’s water programs, which provide federal funding for sewer systems and drinking water. This unified department of infrastructure should incentivize state and local authorities to make smarter choices with federal funding. For instance, it could coordinate the timing of different projects, such as a sewer-line expansion and a road repair, so that the government has to dig only once. It should also consider instituting a so-called corridor-based approach, similar to the one the United Kingdom uses, in which the government evaluates a set of projects designed to solve a particular problem and chooses the most cost effective among them. For example, to improve the flow of people between Washington, D.C., and New York City, policymakers should compare the costs and benefits of investing in highways, high-speed rail, increased airport capacity, and more efficient freight rail and shipping to decide how best to solve the problem, rather than doling out funds to each of the various transportation agencies without coordination.

The United States has reached a fork in the road. It can let its infrastructure crumble, its bridges collapse, and its roads grow ever more congested. While Government at all levels has a tenuous debt-and-deficit situation, government entities can nevertheless also borrow at historically low rates. It makes sense accordingly to lock in cheap money to pay for infrastructure investments with long economic tails. Finally, policymakers should not fear the private sector. Good ideas frequently come from sources outside the government. Cities and states should allow both the public and the private sectors to submit unsolicited proposals for innovative infrastructure projects. Of course, these projects would have to be rigorously and publicly evaluated. But the fact that private companies are motivated by profit is no reason for the government to ignore them.

Foreign Profits Plan Could Be Starter For Tax Reform

U.S. corporations are currently storing roughly $2 trillion in profits offshore and Obama wants to tap into that money through a one-time 14 percent repatriation tax and a 19 percent minimum tax on future foreign earnings. Republican lawmakers haven’t embraced  Obama’s foreign profits tax proposals warmly, but the plan’s similarity to ideas pitched by some in the GOP may set it as an opening bid for business tax reform, particularly since House Ways and Means Chairman Paul Ryan wants to start the reform process by summer’s end.

The similarity between Obama’s plan and one pitched by former Republican House Ways and Means Committee chairman Dave Camp shows there is some space for negotiation — space that will be crucial as Ryan tries to solidify reform efforts in the coming months.

Obama unveiled his international tax plan as part of his 2016 budget blueprint, which the White House released at the beginning of the month. Under the plan, U.S. companies will no longer be allowed to defer taxes on their foreign earnings until they are returned to the U.S. Instead, corporations would pay a one-time tax of 14 percent on so-far untaxed offshore profits and a minimum tax of 19 percent on future earnings.

According to the budget, the 14 percent repatriation tax could raise $268 billion to help pay for a $478 billion, six-year reauthorization of the Highway Trust Fund, which is expected to run out of money in June. The minimum 19 percent tax would raise $206 billion over 10 years, the budget says.

By way of comparison, Dave Camp proposed an 8.75 percent repatriation tax in a comprehensive tax reform proposal he released last year. Camp also wanted to place a minimum 15 percent tax on companies’ intangible earnings, regardless of where they were earned.

Meanwhile, Sens. Rand Paul, R-Ky., and Barbara Boxer, D-Calif., also support a repatriation tax, albeit at a much smaller 6.5 percent rate. At the end of January, the bipartisan duo introduced legislation that would give companies five years to bring their deferred offshore earnings back to the U.S. and would use that revenue to fill the Highway Trust Fund, much like the Obama proposal would.

Meanwhile, it does appear that both sides of the aisle are seriously considering some sort of comprehensive reform plan, which could be aided by the similarities in Camp and Obama’s international tax proposals.

House Sends Keystone Approval Bill To President Obama

The U.S. House of Representatives on Wednesday passed a bill that would force the federal government to approve TransCanada Corp.’s controversial Keystone XL oil pipeline, a move President Barack Obama has warned he will Veto.

Republicans in the House with some Democratic support pushed through the bill, that the Senate passed two weeks ago. The Senate’s road was much tougher, with the passage process drawn out as Democrats fought unsuccessfully to stall it. As the Keystone bill now now heads to Obama’s desk, it is doubtful the Senate will be able to muster the 67 votes needed to override the president’s veto.

The measure passed by a 270-152 vote, with 29 Democrats joining 241 Republicans in voting for passage and one Republican joining 151 Democrats who opposed it.

Obama has based his opposition to the pipeline on a variety of issues, including state court litigation and the U.S. State Department’s ongoing review of TransCanada’s application.

Comments from various federal agencies recently have been submitted to the State Department, including from the U.S. Department of Defense, which said it has no problems with the pipeline. The U.S. Environmental Protection Agency, however, said the State Department should reconsider its supplemental final environmental impact statement. And the State Department previously found that approving the pipeline would not have much of an effect on GHG emissions.

The Keystone bill dominated the first few weeks of the new Congress and prompted a wide-ranging discussion of its benefits and drawbacks. Before the Senate voted, it took up a dozen amendments to the legislation, passing only one concerning energy retrofitting for schools. Democrats had refused to end debate on the bill until all pending amendments had been voted on.

Some of the other failed amendments included removing land from consideration as wilderness areas unless Congress acts on them within a year; campaign finance disclosure requirements for companies that stand to make more than $1 million from the tar sands; removing the lesser prairie chicken from the threatened species list and speeding up the approval process for liquefied natural gas exportation to World Trade Organization members.

Keystone XL is intended to carry tar sands crude oil from Alberta, Canada, to the Gulf Coast, with a southern 485-mile portion of the proposed span running from the crude market hub at Cushing, Oklahoma, to refineries near Port Arthur, Texas, having already been approved.

The pipeline still faces a snag in South Dakota, where a project permit expired last June. TransCanada is currently pursuing a recertification of the permit but has been met with firm opposition by local environmental and community groups.

SENATE ADVANCES KEYSTONE PIPELINE CONSTRUCTION BILL

Legislation giving the go ahead to the Keystone XL pipeline moved closer to the president’s desk on Monday night, as the Senate voted to commence debate on the bill to approve the massive project that has been in limbo for more than five years.

The Senate voted 63-32 to advance the bill to the floor, clearing the 60-vote cloture hurdle for a bill that would bypass White House review of the controversial TransCanada Corp. pipeline. A floor vote on the bill could come as early as this week. (Cloture -Rule 22–is the only formal procedure that Senate rules provide for breaking a filibuster. A filibuster is an attempt to block or delay Senate action on a bill or other matter. Under cloture, the Senate may limit consideration of a pending matter to 30 additional hours of debate).

The House of Representatives passed its own Keystone approval bill on Friday by a comfortable 266-153 margin. Twenty-eight Democrats joined all but four of the House’s 242 Republicans in voting yes.

The companion bill in the Senate has 59 co-sponsors, including Democrats Mark Warner of Virginia, Jon Tester of Montana, Claire McCaskill of Missouri, Joe Donnelly of Indiana, Heidi Heitkamp of North Dakota and Joe Manchin of West Virginia.

The Senate Keystone bill is moving with lightning speed through the chamber. It was the first bill introduced during the new session last week, and will likely be sitting on the president’s desk in a matter of days.

President Barack Obama has pledged to veto the bill once it reaches his desk. The Senate would need 67 votes to overcome a presidential veto.

The project had been held up by a court challenge in Nebraska, but that state’s Supreme Court last week upheld the state’s approval of the Keystone route through the state. The decision removes a roadblock frequently cited by President Obama as part of his hesitation to sign a bill approving the project.

The pipeline will carry tar sands crude oil 1,700 miles from Alberta, Canada, to the Gulf Coast. TransCanada has already secured the necessary permits for the 485 miles of the pipeline running from the crude market hub at Cushing, Oklahoma, to refineries near Port Arthur, Texas, after deciding to split the lower segment from the more contentious northern route that runs into Canada.

TransCanada submitted its original permit application in 2008. The company agreed in 2011 to consider alternative routes for the pipeline after the Nebraska Legislature passed a law requiring it to build around a major aquifer in the state.

The White House still rejected TransCanada’s initial bid in 2012, following controversy over a congressionally imposed deadline to act on the company’s request. But he left the door open for TransCanada to reapply and has expedited the new review of the project. The U.S. Department of State concluded last year that the project is unlikely to increase the rate of oil sands drilling or heavy crude demand significantly, but the U.S. Environmental Protection Agency has criticized the conclusions as not giving enough consideration to alternative pipeline routes and relying on outdated energy-economic modeling.

Obama has said he would approve the pipeline only if it does not “significantly exacerbate the effects of carbon pollution.”