Post-Midterm Election, Infrastructure Could Once Again Become a Prominent Issue on the Congressional Agenda
With Democrats taking control of the House, of the numerous issues that may find their way to Congress’s 2019 docket, infrastructure is one of the most notable. Infrastructure saw much fanfare in 2017 through mid-2018, especially with the release of the administration’s infrastructure principles in February, but progress stalled because of lack of agreement. And now, the subject is seeing renewed interest as infrastructure is one of the few major issues that could garner bipartisan support in the current political climate.
How we got Here
Before the November 2016 election, Trump campaign representatives Wilbur Ross (now Commerce secretary) and Peter Navarro (now White House national trade council director) proposed a federal tax credit to generate private investment in infrastructure projects. Their proposal involved $137 billion in federal tax credits to generate a $1 trillion in infrastructure investment. A federal infrastructure tax credit (FITC) has been suggested in some form by both the president and Congress. For example, the bipartisan Move America Act of 2017 (a reintroduction of the Move America Act of 2015), would have authorized more tax-exempt bonds for infrastructure projects and allowed states to convert a portion of that bond authority into tax credits. That bill would have leveraged $8 billion in federal funding into an estimated $226 billion worth of bond authority or $56 billion in tax credits over the next decade.
After the effort to repeal and replace the Affordable Care Act stalled, the Republican-led Congress focused more on tax reform in the second half of 2017. Once tax legislation was passed, the White House blueprint for infrastructure was released in February 2018. Democrats in turn released their own infrastructure plan in March 2018, an update of their previous plan from January 2017. Neither plan advanced past the introduction stage and by mid-2018 it became evident consideration of any infrastructure legislation would be put on hold until after the mid-term elections, where a battle for control of Congress would impact 2019 priorities.
Interestingly, infrastructure is one of the few policy areas where congressional Democrats may be closer to the administration than congressional Republicans. The soon-to-be Democrat-controlled House could mean the Move America Act may be better positioned than if Republicans had retained control; House Republicans appeared skeptical of the president’s infrastructure proposal.
Novogradac’s post-midterm analysis included a cautiously optimist infrastructure outlook. In addition to being one of the few issues on which a divided Congress could possibly, infrastructure was also a major campaign pledge on which Trump ran. As such, bipartisan proposals like the Move America Act, which was introduced by Sens. John Hoeven, R-N.D., Ron Wyden, D-Ore., Reps. Jackie Walorski, R-Ind., and Earl Blumenauer, D-Ore., could be a key part of such legislation. Blumenauer in particular is well-known as a leading advocate of infrastructure legislation and is poised to be a key player to advance such legislation.
If infrastructure legislation were to gain momentum, it could serve as a legislative vehicle for low-income housing tax credit (LIHTC), new markets tax credits (NMTC), opportunity zones, historic tax credits and renewable energy legislation. With Rep. Richard Neal, D-Mass., becoming chairman of the House Ways and Means Committee, and given his longtime leadership on LIHTC and NMTC legislation over the years, there is a good chance that he will push for such legislation next year. In addition to support from Neal and Blumenauer, others have gone on record in support of infrastructure legislation, including Reps. Peter DeFazio, D-Ore., and Sam Graves, R-Mo., who will serve as the top Democrat and Republican on the transportation panel, respectively.
Finding Funding Sources
Renewed interest in infrastructure planning requires that adequate funding sources for proposed spending – one of the more challenging obstacles hindering congressional agreement – be addressed. Both sides agree that addressing the country’s infrastructure issues would call for at least $1 trillion over 10 years. The infrastructure plan announced in February 2018 by the administration was criticized by Democrats as it envisioned the bulk of the necessary funds would be covered by local governments and the private sector, with federal funding covering only $200 billion of the proposed $1.5 trillion investment. One funding option, an increase in the gas tax, has been suggested numerous times over the past year and a half but Republicans have been reluctant to consider this. (It should be noted the gas tax, currently $0.184 per gallon, remains unchanged since 1993.) To maintain the bipartisan support infrastructure enjoys any plans put forth will have to appeal to the fundamental budgetary policies of both sides of the aisle.
As we head into 2019, the fate of infrastructure planning remains to be seen. Those looking to advance the discussion may do well to highlight the interconnectedness of issues such as affordable housing and community development to infrastructure. The Senate Democrats’ infrastructure plan mentioned earlier included a section on “Stabilizing Neighborhood, Remediating Lead Hazards and Building Affordable Housing.” Of the $1 trillion proposed plan budget, $62 billion was proposed for programs such as the LIHTC, NMTC, capital investments in public housing, and the Department of Housing and Urban Development’s Choice Neighborhoods and Community Development Block Grant programs, among others focused on housing and community development. As one of the president’s campaign pledges, it is likely any infrastructure legislation making it out of Congress faces a good chance of enactment, and having it serve as the umbrella under which other vital program areas can be addressed could bolster its support, provided funding issues can be addressed.