In his inaugural address, President Trump committed to "transform America's crumbling infrastructure." But his infrastructure plan, which would provide significant tax credits to companies that invest in the country's infrastructure, provides few details.
In a new article published in Bloomberg Government, Brattle Principal Elaine Buckberg poses some critical questions to help assess whether the Trump tax credits will leave a legacy of economically important projects or subsidize private investments with little public benefit.
The infrastructure plan authored by Trump's nominee for Commerce Secretary, Wilbur Ross, and White House National Trade Council head, Peter Navarro, calls for $137 billion in tax credits for private-equity investments in infrastructure. The Trump proposal provides no upfront cash, just a tax benefit for private investors—departing from longstanding federal policy of giving states and municipalities money to build infrastructure. Yet the authors argue that the tax credits would stimulate $1 trillion in infrastructure investment.
Dr. Buckberg, a former Deputy Assistant Secretary for Policy Coordination at the U.S. Treasury Department, explores three key questions that must be addressed if the Trump era is to leave behind a meaningful legacy of infrastructure investments:
- Will the tax credits support public infrastructure investment or just subsidize the private sector?
- Even if directed to public projects, can tax credits bring down infrastructure costs to states and municipalities?
- How do we ensure the tax credits go to high-value public infrastructure?
According to Dr. Buckberg, if the Trump Administration funds infrastructure with tax credits, competitively allocating them to projects with high public economic benefits is the best way to avoid letting taxpayers subsidize $1 trillion in private projects with little public benefit.
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