The White House released an infrastructure proposal in February that would leverage $200 billion in federal funds to spur $1.5 trillion in investments for roads, bridges, water systems, and other assets. The plan also streamlines the federal permitting process and expands workforce training and education. It is a top legislative priority of the Trump Administration ahead of the midterm elections this fall.
As outlined, the plan is funded and financed by creating and expanding five key programs: project sponsor incentives, rural infrastructure, establishing a federal capital revolving fund, expansion of existing financing programs, and more transformative projects.
There is agreement that America’s infrastructure needs repair. The American Society of Civil Engineers in its 2017 Infrastructure Report Card gave the nation a grade of D+ and estimates that an additional $2 trillion in investment is needed over the next 10 years.
The White House proposal envisions a greater role for public-private partnerships in financing infrastructure projects. Australia has had success in the last 10 years with such a model, leading some to conclude a similar model could work in the U.S.
Political observers have noted that infrastructure is a bipartisan issue that should be able to attract support from Republicans and Democrats. However, there is not widespread agreement among lawmakers as to how to pay for infrastructure projects. For example, the 18.4 cents-per-gallon federal tax on gasoline and 24.4 cents-per-gallon federal tax on diesel fuel used to finance road improvement projects has not been increased since 1993.
According to the Tax Policy Center, if tax rates had been indexed for inflation since 1993, the current tax on gasoline would be about 31 cents-per-gallon and the tax on diesel fuel would be about 42 cents-per-gallon.
Raising the federal fuels tax is politically unpopular even though the funds are used to repair the nation’s roads. Following the release of the White House infrastructure plan, President Trump discussed raising the gas tax by 25 cents-per-gallon to maintain and strengthen America’s interstate highway system. Were such a plan to come to fruition, it would be phased in over a five-year period by increasing the tax five cents each year.
The gas tax is an imperfect but still effective mechanism for funding road construction. Although the users of the surface transportation system pay for its upkeep, the tax was created before the advent of plug-in hybrids and more fuel-efficient vehicles.
Since 2008, federal fuels tax revenue is no longer sufficient on its own to meet the nation’s surface transportation needs. The Tax Policy Center reports that $143 billion of general revenues has been transferred since 2008 to the highway trust fund, including $70 billion in 2016.
Business groups such as the U.S. Chamber of Commerce support increasing the gas tax, arguing that the infrastructure investment is needed for continue economic growth. However, conservative groups such as Americans for Prosperity oppose any tax increase, including one that funds infrastructure improvements.
Beyond project funding, President Trump seeks to restructure the federal environmental review and permitting for major infrastructure projects by reducing the process to two years, amending statutory provisions to eliminate redundancies and inefficiencies in environmental laws, and focusing on environmental outcomes rather than processes.
This would give primary authority to agencies such as the Army Corps of Engineers to make jurisdictional determinations under the Clean Water Act (CWA) and remove the Environmental Protection Agency’s (EPA) authority to veto CWA Section 404 permits. Residential construction would benefit as home builders rely on such permits when performing work that affects wetlands and streams.
Workforce training and development is included in the plan as well. It addresses the construction industry labor shortage by increasing funding for the Carl D. Perkins Career and Technical Education program, thereby ensuring more students have access to high-quality technical education to develop the skills required in today’s economy. In addition, Pell Grant eligibility is expanded to students of high quality, short-term programs that lead to a credential or certification in an in-demand field.
NLBMDA supports increased infrastructure funding to reduce congestion on the nation’s roads. Deteriorating infrastructure is a growing concern for the lumber and building material industry, which needs a strong transportation network to receive inventory and make customer deliveries in a timely manner. NLBMDA is monitoring the debate on Capitol Hill and stands ready to protect the interests of the LBM industry.