Financing Infrastructure Investment
WM: Leveraging the Tax Code for Infrastructure Investment, May 19, 2021
Finance: Funding and Financing Options to Bolster American Infrastructure, May 18, 2021
Our recommendations on funding infrastructure with a motor fuel tax are still valid. We could also use a carbon value added tax to provide receipt visibility for more informed consumer choice. The key to making such taxes adequate, aside from recognizing the inelastic nature of gasoline prices, is to bring back “pork barrel” spending.
We submitted testimony to the Energy and Water Projects Appropriation regarding fusion power and electric vehicles on dedicated roads with computer control. These are attached.
A key part of any infrastructure plan is to encourage household spending, which is helped by government action and results in industrial spending on plant and equipment.
As we commented to Ways and Means last month regarding Trade Infrastructure:
Recent changes to the Child Tax Credit 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.
Last month, I told my story as a stay at home parent who had gone back to work, adding an analysis of sick leave and child care infrastructure issues.:
Not requiring sick leave has been justified by the reactionary sector that claims that in the end, the market will sort everything out. Keynes would respond that in the long run, we are all dead. Let me add that one should not have to wait to die for a day off. Marx would agree. For the market to work, there must be both perfect information and no barriers to entry or exit, no black lists, no private salary information. No such luck.
The perception that doing the right thing makes a business non-competitive is the reason we enact minimum wage laws and should require mandatory leave. Because the labor product is almost always well above wages paid, few jobs are lost when this occurs. Higher wages simply reduce what is called the labor surplus, and not only by Marx. Any CFO who cannot calculate the current productive surplus will soon be seeking a job with adequate wages and sick leave.
The requirement that this be provided ends the calculation of whether doing so makes a firm non-competitive because all competitors must provide the same benefit. This applies to businesses of all sizes. If a firm is so precarious that it cannot survive this change, it is probably not viable without it.
Childcare is best provided by the employer or the employee-owned or cooperative firm.On-site care, with separate spaces for well and sick children, as well as an on-site medical site for sick employees, will uncomplicate the morning and evening routine. Making yet another stop in an already busy schedule adds to the stress of the day. Knowing that, if problems arise, parents can be right there, will help workers focus on work.
Larger firms and government agencies can more easily provide such facilities. Indeed, in the Reeves Center of the District Government, such a site already exists. When the crisis is over, a staff visit would prove illuminating.
Smaller firms could make arrangements with the landlord of the building where offices or stores are located, including retail districts and shopping malls. For security reasons, these would only serve local workers, but not retail customers.
A tax on employers would help society share the pain for requiring paid leave. Firms that offer leave would receive a credit on their taxes (especially low wage firms. Tax rates should be set high enough so that
From January 2020 Comments to the House Budget Committee:
Our main tool in providing for human services is an employer-paid subtraction value added tax. This levy would be used more to channel tax expenditures to employees rather than through categorical or block grants. The most important feature is an expanded refundable child tax credit, which would be distributed with pay and set to provide income at middle class levels.
The S-VAT could be levied at both the state and federal levels with a common base and tax benefits differing between the states based on their cost of living (which would be paid with the state levy). The federal tax would be the floor of support so that no state could keep any part of its population poor, including migrants. It is time to end the race to the bottom and its associated war on the poor.
The S-VAT will also facilitate human capital expenditures, with credits to support tuition, wages and benefits for low-skill workers from ESL and remedial education to apprenticeship. These benefits can be used in cooperation with existing workforce investment boards, community colleges and economic development agencies.
Private education providers should also be included in the mix, including and especially the Catholic education system. Blaine Amendments need repeal, opposition to unions ended and a focus on non-college bound students encouraged.
Medicaid for senior citizens and the disabled is a huge contingent liability for some states. In his New Federalism proposals, President Reagan offered to assume these costs in exchange for state funding of all other federal support. The first half of this proposal should be implemented in the form of a new Medicare Part E with no requirement for local funding.
The remainder of health costs would be paid through employer subsidies to low-wage trainees, as described above through an S-VAT, with state goods and services taxes (invoice VAT) covering cash, food and health benefits for unattached non-workers until they can be placed in the appropriate employment or disability program (including substance abuse intervention).
Increasing the general wage level, through higher minimum wages, will remove workers from poverty. The concept of being a member of the working poor should be banished from the national conversation with an eventual $18 (changed from $20) minimum wage for both employment and training program participation, starting with $10 changed from $15) immediately. This wage level should adjust for inflation automatically. The best support for state budgets is to make sure that everyone is trained up to their potential.
Tax credit support for families is a better recession circuit breaker than waiting for the Congress and state legislatures to act, although increasing the child tax credit (which should be inflation adjusted) is the best way to provide immediate stimulus, as do higher Food Stamps (which would be mostly repealed by a higher CTC).
The other circuit breaker in a recession is increased income taxation on the wealthy. Recessions do not happen, as Marx and Schumpeter posited, from overproduction or a business cycle. They come about because the wealthy have received tax breaks which encourage asset inflation and questionable investment (often with an assist from the Federal Reserve so that such investments may be migrated to Main Street). Higher income tax rates take money from the savings sector so that the consumption sector can recover (even without government subsidies).
Higher taxes on the wealthy are beneficial to the economy, now and in the next recession, because they take money out of asset inflation in the savings sector and can then be used to increase spending on the elements of GDP: government purchases, household consumption, net exports and plant and equipment investment (which is not part of asset speculation, as supply side economists falsely assert).
We submitted testimony on the Financial Services and General Government Appropriation regarding our proposed asset value added tax, which includes ending the exemption for mutual funds, and our current analysis on an upcoming recession and how to deal with it. This is also attached. Most of what we said in January 2020 is still current more than a year later, including that a new financial panic and recession is pending. The pandemic response by the federal reserve was a life preserver for the speculation sector. This time, we need to go beyond Wall Street.
Finally, we have attached our analysis of who owes and owns the national debt as a form of class warfare. Claims that the deficit is a vital issue are true, but the solution is not foregoing infrastructure, it is taxing the holders of the debt. Interestingly enough, President Biden identifies correctly those who are in that class. Their taxes should go up, but not to fund infrastructure. We will get more traction from the donor class once we demonstrate both who owns and who owes the national debt.
Attachment - Our Nation’s Crumbling Infrastructure
posted by Michael Bindner at 10:00 AM
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