Infrastructure spending: After federal tax cut, Trump looks at local increases
Localities would bear more of cost for improving infrastructure
WASHINGTON — Even as President Donald Trump and Republicans in Congress seek to cut federal taxes, the White House has quietly come up with a very different plan for infrastructure: It wants to reward states and localities willing to raise taxes or other revenue to pay for new projects.
The dynamic is key to the Trump administration’s latest thinking on an infrastructure bill aimed at spurring a $1 trillion investment in the nation’s aging roads, bridges and rail lines.
Originally touted by Trump as a first 100-days initiative — his transition team even asked Iowa for its list of top five projects, two of which are in the Corridor — it has stalled amid other legislative battles.
The approach now being contemplated is considered innovative by some experts but also carries considerable political and economic risks for Trump.
Under legislation being developed, Washington would cover only $200 billion of the $1 trillion tab over a decade.
Many state and local officials and congressional Democrats want to see more robust federal investment, but some in Trump’s party are wary of new spending. Still, some in both parties fear that taxes and fees raised at the local level could cancel out any potential benefits to constituents of a federal tax bill.
“The state and local sector as a whole is already feeling beleaguered,” said Tracy Gordon, a senior fellow with the Urban-Brookings Tax Policy Center. “I’m not sure this is going to go over very well.”
As described by White House aides familiar with Trump’s initiative, additional federal funding would be available on a competitive basis for states and localities that submit plans outlining how they would raise new revenue dedicated to infrastructure.
Jurisdictions could raise their gas or sales tax rates, for example, or increase revenue flowing to infrastructure projects in a variety of other ways, such as imposing new tolls or selling off existing assets.
One of the five Iowa priorities outlined in a list provided last year by state officials after Tump was elected was federal help toward a flood wall in Cedar Rapids.
In its wish list, the state said the city had committed more than $130 million and the state Flood Mitigation Board had committed $269 million. It asked for another $230 million from the federal government.
Despite measures in Congress to set the flood mitigation project as a priority, federal money to help has not come.
The lack of federal money led Mayor Ron Corbett to suggest in September that the city should consider asking voters to extend a penny sales tax for road improvements, but split the proceeds to help with flood protection.
Under the administration’s concept, such a local tax might help the project get more attention from Washington in doling out grants.
Iowa also put on its wish list speeding up the remake of the Interstates 80/380 interchange. The seven-year, $270 million overhaul already is set to get the usual 80 percent of federal funding, but officials said they’d speed up the work — bringing economic advantages and reducing crashes — if they got money sooner.
The overall $200 billion in federal funding would be spent in the coming decade, with the aim of leveraging at least $800 billion from state and local governments and the private sector.
The White House also envisions setting aside some of the $200 billion for rural projects, which would be eligible for more generous grants.
R. Richard Geddes, director of the Cornell Program in Infrastructure Policy, said the plan has potential to spur more creative solutions on the local level and lessen dependence on the gas tax.
Iowa passed an additional 10-cents-a-gallon gas tax in 2015 that has produced an extra $515 million for state and local governments to put toward fixing Iowa’s roads and bridges.
But with Americans driving less, and the advent of electric cars, long-term funding solutions still are necessary.
Some argue it’s more equitable to come up with user-based fees, such as tolls. Others advocate “asset recycling,” in which governments sell or lease roads and airports and use the money for new projects.
“To the degree that the federal government can incentivize states to think about alternatives, I’m happy,” Geddes said.
White House aides say their plan will be ready to debut after a tax bill is signed, but questions about both the substance and politics remain plentiful — including how exactly it will be paid for, particularly in the wake of a tax bill expected to add $1.5 trillion to the deficit over 10 years.
The administration has been reaching out to state and local officials across the country, including Democrats, as it puts together its plan and prepares to pitch it to Congress.
Some see a tough sell.
Jim Manley, a lobbyist who previously was a longtime aide to Senate Minority Leader Harry M. Reid, D-Nev., said he has a hard time envisioning many Republicans embracing a plan that provides an incentive for localities to raise taxes.
“I believe that is going to be a deal-killer for a lot of Republicans,” he said — and many Democrats are likely to be skeptical of “sticking it to the states.”
The Washington Post contributed.