Advancing U.S. Economic Competitiveness, Equity, and Sustainability Through Infrastructure Investments

 WM Trade: Advancing U.S. Economic Competitiveness, Equity, and Sustainability Through Infrastructure Investments, April 29, 2021

I notice the similarity between the title of a hearing last year on this subject. I am attaching the core points. While this hearing is focused on physical infrastructure, this is a good opportunity to consider progress on the issue.

Last year, we repeated our previous comments on the WTO. This year, the world is dealing with COVID, so much of that discussion is currently irrelevant.

Our main thrust was on replacing tariffs with a border-adjustable credit invoice value added tax. This is still a concern, which I brought to the Subcommittee’s attention very recently, so I will not repeat them again. I also assume that some on your staff can recite our tax reform plan, so I will not include the usual attachment either.

Please hold hearings on this possibility. I would like to testify, although our friends at the Brookings-Urban Tax Policy Center have done the heavy lifting on VAT mechanics. My focus is on an employer-paid subtraction value added tax and an asset value added tax, allowing most families to avoid filing taxes altogether.

Recent changes to the Child Tax Credit (which should be made permanent) are the best trade infrastructure we can hope for, although a higher minimum wage is even more desirable. People need more money to buy imported goods and to go back into the labor force. There are many discouraged workers, some of which turn to less than legal means to earn an income. It is time to allow them back into the light. Work does not meet the needs of many workers. Now is the time to change this.

On the government side, the Internal Revenue Service has been tasked with distributing the CTC before the end of this tax year. July is the current goal. We can do better. Rather than relying on payments from the IRS, families who already receive some form of government benefit should receive a refundable CTC through their current benefit stream. We can start this today. Computers can be programmed and cash delivered.

Part of the need for economic infrastructure must be an immediate COLA for Social Security beneficiaries. Of late, food prices have gone through the rough. Now that stimulus payments have been spent, many of us will be very hungry, very soon. We cannot even by cola without a COLA.

Benefits to workers are even easier to set up. Simply promise employers that they can take any additional credits paid due to refundability (they can already manage adjusting normal withholding) as a credit to their quarterly payments to the Internal Revenue Service. Easy.

Employee-ownership is still a good idea. This year, it is even better. To get the ball rolling, simply expand the ESOP exemption from private companies to shareholders in public companies. 

Enacting an asset value added tax, with zero rating for option exercise and first sales after inheritance, gift and donation can wait for comprehensive tax reform. We can make this small change now.

In time, we can revisit how the employer contribution to Social Security is credited and how it is distributed. That discussion can wait until more companies choose to set up ESOPs.

I will let the invited witnesses address what can be done to improve roads, bridges and rails, all of which are essential infrastructure investments. Expanding freight rail should be a big part of that story. It saves energy and emits less carbon. While this will impact long-haul trucking, a growing economy, fueled by families with more money, will more than make up the difference in short-haul delivery.

Many ports will need to change configurations to expand freight rail and reduce reliance on long-haul trucking. This is a luxury problem. Such problems are a perfect object for expanded federal assistance to our railroad infrastructure. 

Either loans or grants should fit the bill. Higher motor vehicle fuel taxes can help transport good as well as people. A carbon value added tax (rather than a simple carbon tax embedded in the price) will better allow consumer choice for both consumers and distributors. 

Because energy expenses are inelastic, price information needs invoicing to help make intelligent choices and to educate the public on the necessity for these taxes. Nothing wakes people up like seeing something on an invoice.

Another aspect of infrastructure is essential. We need more workers and they need to have the language skills to allow for even greater involvement in the American economy. Immigration needs reform - and it should be more on the lines proposed by both the current Administration and by President Bush. Before the current GOP went off the rails, W. had many good ideas. This is one of them.

Of course, our biggest improvement is the recent change in Administrations. Our current President will not pursue gunboat trade policy and will make infrastructure happen without having an elusive infrastructure week.

Attachment: 2020 Hearing