Options to Offset An Infrastructure Package
A meeting between Democratic Congressional leaders and President Trump a few weeks ago raised the possibility of an infrastructure package. The meeting ended with apparent agreement on a $2 trillion package, though without clear details on what that means and what the package would contain. With another infrastructure meeting scheduled soon, it is important to note that policymakers have numerous infrastructure-related options at their disposal to offset the cost.
Below we have compiled some possible options to offset the cost of an infrastructure package from various sources and past estimates, including the Congressional Budget Office, Joint Committee on Taxation, American Association of State Highway and Transportation Officials, and others. These are rough and rounded estimates, and exact numbers could vary depending on the details.
First, there are many revenue options related to infrastructure. Existing transportation taxes, such as gas and diesel taxes, could be raised, or new revenue sources and other tax increases could be considered.
|Index gas and diesel fuel taxes for inflation||$40 billion|
|Increase gas and diesel fuel taxes||~$12 billion/cent|
|Enact a carbon tax||~$45 billion/dollar|
|Enact a ton-mile freight tax||$23 billion/cent|
|Enact a percent tax on freight revenue||$10 billion/0.1 percent|
|Impose vehicle registration fee||$30 billion/10 dollars|
|Impose a sales tax on light-duty vehicles||$40 billion/1 percent|
|Impose per-mile Vehicle Miles Traveled (VMT) fee||$35 billion/0.1 cents|
|Impose a per-barrel oil tax||$30 billion/1 dollar|
|Increase truck and trailer tax from 12% to 20%||$30 billion|
|Institute $10 driver's license surcharge||$25 billion|
|Repeal special gas and diesel tax rates on certain fuels||$20 billion|
|Double heavy vehicle use tax||$15 billion|
|End Section 179 “SUV loophole”||$10 billion|
|Establish new rail safety and inland waterways fees||$10 billion|
|Impose a $100 truck registration fee||$10 billion|
Sources: Congressional Budget Office, Joint Committee on Taxation, American Association of State Highway and Transportation Officials, CRFB calculations. Savings shown through 2029.
Spending reductions related to infrastructure could offset higher infrastructure spending. Doing so would lower the net spending increase of the package, but presumably shift funding from lower-priority to higher-priority spending.
|Limit Highway Trust Fund spending to dedicated revenue||$140 billion|
|Eliminate the Federal Transit Administration||$100 billion|
|Eliminate Private Activity Bonds||$40 billion|
|Eliminate the Community Development Block Grant||$25 billion|
|Eliminate Capital Investment Grants||$25 billion|
|Eliminate Amtrak and Essential Air Service funding||$20 billion|
|Repeal the Davis-Bacon Act||$15 billion|
|Sell various electricity transmission assets||$10 billion|
|Reform the National Flood Insurance Program||$10 billion|
|Reduce funding to Highway Safety Improvement Program||$10 billion|
|Eliminate grants to large and medium-sized airports||$10 billion|
|Eliminate funding for the Transportation Alternatives Program||$10 billion|
Sources: Congressional Budget Office, Office of Management and Budget, Federal Highway Administration, and CRFB calculations. Savings shown through 2029.
Lawmakers could also draw on countless other options from the rest of the federal budget to offset an infrastructure package. Regardless of how they choose to do it, there is no excuse for enacting a deficit-increasing package. It would be better for both the budget and long-term economic growth if increased infrastructure spending is offset.