The argument that America’s roads and bridges need fixing is the only point on which lawmakers and the White House appear to agree on when it comes to an infrastructure package they have already spent weeks negotiating.
How to foot the bill and what kinds of programs should fall under the expanding umbrella of infrastructure remained key points of contention after Senate Republicans unveiled their counterproposal on Thursday.
The group of Republicans, led by Sen. Shelley Moore Capito, said their plan would spend $928 billion on a narrow definition of infrastructure, such as roads, ports, and public transit. But critics who want a larger investment quickly noted much of that figure includes baseline spending, or what the government already directs to such projects, representing an even smaller proposal than presented — and a pittance compared to the Biden administration’s more than $2 trillion plan.
BIDEN PLANS TALKS WITH GOP ON NEW INFRASTRUCTURE COUNTEROFFER, REVIVING HOPES FOR BIPARTISAN DEAL
Republicans also said they hoped to fund their counteroffer without raising taxes — a key component of President Joe Biden’s plan. Here are the options on the table for how to pick up the tab for infrastructure.
UNSPENT COVID-19 FUNDS
GOP lawmakers said Congress should redirect $575 billion from coronavirus relief packages to cover the bulk of their proposal.
“We can identify funding from these packages that is no longer needed as we emerge from the pandemic, or that is not slated to be spent for several years — if at all,” the group of Republican senators wrote in a memo to the White House obtained by the Washington Examiner. “As an example, billions of dollars will not be spent by those states that decided to encourage workers to return to work by not paying out unemployment insurance.”
The senators referred to a federal program that offered a $300 weekly boost to state unemployment insurance. Several states scrapped that program as businesses reported struggles to attract workers who may be pocketing more by staying home.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said lawmakers could likely find unused funds in money set aside during the pandemic for state and local governments.
“There’s funds that haven’t been spent, and may well not be able to be spent for the original purposes,” MacGuineas told the Washington Examiner.
The White House seemingly threw cold water on the GOP pay-for by releasing a statement Thursday that claimed “about 95%” of coronavirus relief funds had already been obligated or were sitting in existing programs as of March, such as unemployment or nutrition assistance programs.
The White House said the remainder is mostly destined for rural hospitals and small businesses, likely setting up an argument that Republicans want to take money from those things to fund their plan.
USER FEES
Republicans said in their memo that user fees would also help cover the cost of their infrastructure plan.
Republicans argue user fees, such as gas taxes or highway tolls, force the people who use infrastructure to pay for it.
But many Democrats contend that user fees disproportionately affect lower-income people and absolve corporations and the wealthy from the obligation to pay for their fair share of the projects.
Still, some Senate Democrats have expressed a willingness to entertain the idea of including user fees, and the White House did not outright reject the idea on Thursday.
CORPORATE TAX HIKES
In March, the Biden administration proposed raising the corporate tax rate to 28%, up from the 21% level the Trump administration secured through its tax reform bill in 2017, to cover the largest share of its infrastructure plan.
Even some Democrats have expressed discomfort with a hike that dramatic, and some have begun to coalesce around the idea of raising the rate to 25% instead.
The White House has attempted to blunt GOP criticism that a higher tax on businesses will drive them overseas by simultaneously proposing a global minimum tax. Under that proposal, the Biden administration would persuade other countries to set their corporate rates at the same level as the United States, theoretically eliminating the incentive for a company to move its operations offshore.
However, some experts have suggested the Biden administration is tacitly acknowledging that a corporate tax rate hurts businesses by recognizing the need for a global minimum tax in the first place. And others have questioned the effectiveness of such a plan, as there’s no guarantee other countries will agree to change their own policies to fit the Biden administration’s needs.
IRS ENFORCEMENT
The Biden administration has suggested stepping up the Internal Revenue Service’s enforcement activities as another way to cover the cost of infrastructure.
“A decade ago, essentially all large corporations were audited annually by the IRS; today, audit rates are less than 50 percent,” the White House wrote in its initial proposal in March. “This plan will reverse these trends, and make sure that the Internal Revenue Service has the resources it needs to effectively enforce the tax laws against corporations.”
The White House has said fortifying the IRS could raise $700 billion over the next decade, covering a substantial chunk of the infrastructure plan within the 15-year payment window.
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MacGuineas said that while the IRS does leave a substantial amount of money on the table in unpaid taxes annually, the estimates of how much it could actually clawback “may be overstated.”
“We know there’s a tremendous amount of uncollected revenue every year,” she said. “Those estimates of how much goes uncollected are probably credible numbers.”
“It’s definitely a good idea,” she said of the plan to empower the IRS to collect more aggressively, “and I think we should be conservative in how much money we think will be collected.”
