Corporate Tax

Elevating corporate taxes is not the one approach to fund infrastructure

In a way, the 18.4 cents the federal government collects for every gallon of gasoline sold in the US is the ideal tax. Martin Wachs, professor emeritus at UCLA’s Department of Urban Planning, even calls it “kind of magical”.

It is a consumption tax, meaning the government is paid at the place of manufacture, not the point of sale. By the time you head to the pump, the cost of the tax is rolled into the sticker price, and most people, Wachs says, have no idea how much they’re paying. No personal information is collected with the tax, so no one can track your behavior based on fuel consumption or travel patterns. The money goes to the Highway Trust Fund (HTF) and will eventually be used to fund various transport-related projects. The whole arrangement has a satisfactory logic.

But magical taxes may no longer be enough. The country is in dire need of repair, President Biden has put forward a massive infrastructure proposal, and the federal gas tax, which turns 90 next year, is increasingly unsuitable for our modern world. Since 1993, Congress has not been able to bring itself to raise the gas tax or even to tie it to inflation. If infrastructure spending threatens to empty the HTF, Congress has instead decided to approve transfers from the general fund (home of your income tax, corporate taxes, and money from a variety of other sources) to cover the deficit.

And the deficit has to be covered in order to even meet our current needs. The American Society of Civil Engineers (ASCE) gave American infrastructure a grade C in its 2021 certificate. Of the 17 categories defined by the ASCE in its annual report, only two (ports and rail) were given a C +. The report estimates that Americans make 178 million trips over bridges in poor condition every day, and that more than 40 percent of the country’s roads are in poor or moderate condition. The ASCE also includes things like water infrastructure, waste management, schools, and energy systems in its assessment – a broad view of infrastructure that President Biden shares.

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When asked Transport Secretary Pete Buttigieg about his plans for the HTF during his Senate confirmation hearings in January, he initially signaled a willingness to consider a gas tax hike. Within a few hours, a spokesman returned this comment. Buttigieg later said that an increase in gas tax would break President Biden’s election promise not to impose taxes on Americans who earn less than $ 400,000 a year. This led to politicians wondering whether the Biden government would turn to a VMT (Vehicle-Mile-Travised) tax instead. This is sometimes called a road tax.

This type of tax has been tested at the state level and would solve the problem arising from accelerating sales of electric vehicles: EV owners use public roads but are currently not paying the taxes they maintain. A study by the University of Iowa ran pilot programs in California, Oregon, Utah, and a dozen cities. Oregon and Utah both have voluntary, revenue-generating VMT programs, although adoption rates are still low. The pilots should partly help to resolve questions about the calculation and collection of the tax. In some cases, mileage is tracked using a GPS device or an OBD-II module, a small device that plugs into a connector on the underside of the dashboard and records data such as location, vehicle speed, and engine RPM. Otherwise, the tax can simply be based on a regular mileage.

Wachs, a member of the California Road Charge Technical Advisory Committee, a group formed to study alternatives to gas tax, says these pilots were broadly successful. And while a VMT can worry drivers who travel many miles, people who drive fuel efficient vehicles might pay less tax with a VMT system than with a gas tax (although EV owners obviously pay more).

However, Lee Tien, the Electronic Frontier Foundation’s legislative director and a member of the California Advisory Committee, says a VMT tax comes with real privacy concerns. Some of the tracking methods for calculating a road use tax would collect valuable location and behavior data that, unlike what your phone transmits, is directly tied to the names and addresses of vehicle owners. Relying on odometer readings instead of tracking devices eliminates these privacy concerns, but it would also be less accurate as it could include driving on private roads or out of state.

Not everyone is interested in restricting government data collection. Some states are already selling data from their DMV databases to increase revenue. And Tien says the data would be valuable not only to the government, but also to insurance companies, public and private research institutions, and other stakeholders.

For these and other reasons – scaling these programs from the pilot phase onwards would be an enormous logistical challenge – states have to work on making their systems compatible or forego income that they could otherwise generate from non-state drivers – Tien und Wachs Both think we are decades away from a large, mandatory VMT tax.

But President Biden currently has a plan to spend $ 2 trillion on infrastructure projects. And he’d prefer to fund his massive infrastructure bill the simpler way: by increasing the corporate tax rate from 21 percent to 28 percent (the corporate tax rate was 35 percent before the Trump administration’s tax cuts in 2017). California has used a similar strategy to fund government infrastructure projects. 0.25 percent of sales tax on all goods sold in California is returned to counties for use on transportation projects. And in 25 of the state’s 58 counties, voters approved another 0.5 percent increase in sales tax to keep the coffers high.

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Biden’s scheme lacks some of the elegance of the current system of paying transportation-related taxes on transportation projects. But it has another appeal: Congress might actually agree to it. Democrats will have to vote as a block to get the bill to the president’s desk (Senate Republicans likely won’t play), and West Virginia Senator Joe Manchin has previously said he would add a 25 percent corporate tax rate to the proposed Jan. prefer percentage rate. Jeff Bezos, CEO of Amazon, expressed his support for the plan this week despite the fact that Amazon, the country’s second largest employer, has paid $ 0 in federal tax for two of the past three years. It will likely take months for the bill to go through both Houses of Congress, and significant compromises are almost certain. But Biden has said he is ready to work with Republicans and reluctant Democrats to get the bill into law. After the previous government didn’t even propose a detailed plan for infrastructure spending, Biden said, “Inaction is just not an option.”

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