President's Infrastructure Plan Pothole

November 27, 2017

The President has said his infrastructure plan will be made public after the tax reform legislation is passed, but the Republican tax proposal could significantly discourage private investments in public projects. reports the current GOP tax plan passed by the House last week eliminates the deduction for tax-exempt private activity bonds that public-private partnerships (P3) use to finance and build highways, airports, hospitals and other projects.

By killing the deduction, the GOP says almost $40 billion would be saved over 10 years. However, private firms' interest in investing in infrastructure projects could nose-dive, taking President Trump's proposed core infrastructure funding method with them.

The Senate's tax bill retains the deduction but would repeal the tax-exemption for advance refundings of municipal bonds. Eliminating that cost-saving opportunity for governments could hurt infrastructure efforts, advocates say, because the extra savings are sometimes used by transit agencies on infrastructure projects. 

“We are concerned … that changing the treatment of private activity bonds, advance refunding bonds, and tax credit bonds will have a negative impact on overall infrastructure spending,” said Ken Miller, Oklahoma state treasurer and president of the National Association of State Treasurers. 

It's complicated. For more, read The Hill's For Trump, GOP tax bill could have big downside.