Rep. John Delaney, D-Md., has introduced a bipartisan bill that would create an American Infrastructure Fund to provide state and local governments loans and loan guarantees to help finance infrastructure projects.
Delaney claims his Partnership to Build America Act, (H.R. 2084), which has 13 Democrat and 13 Republican sponsors, would place no additional burdens on taxpayers.
The AIF would be funded by the sale of $50 billion of taxable infrastructure bonds that would have 50-year terms and pay fixed interest rate of 1%. The bonds would not be guaranteed by the federal government.
The AIF would leverage the $50 billion of infrastructure bonds at a 15 to 1 ratio to provide up to $750 billion of loans or guarantees to finance transportation, energy, communications, water, education and other infrastructure projects, Delaney said in a release.
States and localities would be required to pay the loans at market rates determined by the AIF to ensure they have "skin in the game."
At least 25% of the projects financed through the AIF would have to be public-private partnerships that provide at least 20% of a project's financing from private capital.
Corporations would be incentivized to purchase the infrastructure bonds because they would be allowed to repatriate a certain amount - determined by a "reverse Dutch auction" - of their overseas earnings tax free for every $1.00 they invest in the bonds, according to a summary of the bill.
In a reverse Dutch auctions, corporations interested in buying the bonds would have to bid against each other. Assuming a 1-to-4, meaning a company would repatriate $4.00 tax free for every $1.00 of infrastructure bonds purchased, the company's effective tax rate to repatriate these earnings would be about 8% and the $4.00 could be spent by the company however it chooses, Delaney said.
"We can't compete in the global economy of the 21st century without a significant investment in our infrastructure," Delaney said in a release. "At no cost to the taxpayer, this legislation will finance our business to grow for decades to come."
The bill joins several other bills and proposals, including one from President Obama, that would create infrastructure banks or funds, but Delaney's is the first that would create incentives for U.S. corporations to buy the infrastructure bonds.
The lawmaker proposed it in the midst of controversy over major U.S. companies, such as Apple and Starbucks, sheltering funds overseas through various structures to avoid paying significant U.S. taxes.