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.

Option Ten-Year Savings
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.

Option Ten-Year Savings
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.