WASHINGTON — Congress should establish a national infrastructure bank and offset the appropriation for it with revenue from a one-time repatriation tax holiday, the Brookings Institution urged in a report released Thursday.
The think tank's Metropolitan Policy Program recommends the infrastructure bank be initially capitalized at about $25 billion. To offset that spending, the government should temporarily reduce the corporate tax rate on money companies bring back to the United States from overseas to 10% from 35%, capping the amount repatriated under the program at $500 million per firm.
The amount of tax revenue generated as a result of the repatriation holiday would be about the same as the amount allotted to the infrastructure bank, according to the estimates from the Joint Committee on Taxation that were cited in the Brookings report. The lower tax rate and the fact that the tax money would be used for economic growth would be an incentive for American companies to bring money back to the United States, said Robert Puentes, one of the report's authors.
America's infrastructure is in poor condition, and there is concern that it is ill-equipped for the 21st century global economy, the report said. Federal investment in infrastructure has decreased by one-third over the past 30 years, and the federal government does not usually pick projects on a merit basis, it said.
A national infrastructure bank, or NIB, would essentially be a revolving loan fund for projects that help to meet national economic goals, Puentes said. The bank could provide: a more streamlined project-selection process; a more rigorous standard for evaluating investments in infrastructure; and expertise to consider innovative projects that require a mix of public and private investors, the report said.
"The establishment of an NIB will send a strong signal to the private sector: the federal government is committed and open to private involvement in infrastructure financing and delivery," it said.
The primary barrier to creating an NIB is finding a way to initially provide money for it. There has been a great deal of partisanship and gridlock that has made passing legislation difficult.
Puentes said that the hope is that the proposal in the report could "get infrastructure back to its bipartisan roots."
The idea of financing infrastructure through a repatriation holiday has been suggested by several politicians including Sen. Rand Paul, R-Ky., and Rep. John Delaney, D-Md., the report said, noting however that there are some lawmakers and organizations that oppose repatriation holidays.
The federal government previously instituted a repatriated tax holiday under the American Jobs Creation Act of 2004, the report said. During this one-year holiday, 843 corporations repatriated $312 billion in overseas earnings, and corporations increased repatriations by almost eight times their normal levels.
But the holiday did not generate significant economic stimulus because lax investment criteria allowed companies to use the repatriated funds to repurchase their own stock. The report said that a new repatriation tax holiday and infrastructure bank would have to be directed appropriately to avoid the problems that occurred with the previous holiday.
