Trump Outbids Clinton on Infrastructure Spending Hikes

We are now within 94 days of the election and the first presidential debate at Hofstra University is right around the corner on September 26th. Between now and the election, Americans can expect each candidate to flesh out their positions on respective policies. One area of policy that has been in the forefront of discussion in this campaign is infrastructure. Last December, Congress passed an infrastructure bill to spend $305 billion over the next five years. Despite this level of funding, Democratic nominee Hillary Clinton and Republican nominee Donald Trump have vowed to provide even more federal spending for roads, bridges, and rails. However, they disagree on how to finance their solutions.

Clinton has called for $275 billion in new infrastructure spending, with $250 billion of that going directly into public infrastructure grants, and the remainder going to a new national infrastructure bank, which will provide direct loans, loan guarantees, and bonds for state and local infrastructure projects. Clinton said that she plans on “fully paying” for these infrastructure “investments” through “business tax reform,” which include increasing the corporate tax rate, closing “loopholes” in the business tax code, and enacting an “‘exit tax’ on unrepatriated earnings.

Last January during a Republican primary debate, Donald Trump offered an infrastructure plan that would be financed by a one-time repatriation tax on offshore corporate earnings at 8.75 percent. Trump’s tax plan that was later released in September increased the tax to 10 percent. It has been estimated that as much as $2 trillion is currently being held offshore due to the prospect of double-taxation through the U.S.’s high corporate tax rate. A similar 14 percent repatriation tax was included in President Obama’s FY 2016 budget proposal and is estimated to increase revenues by $268.1 billion over six years. At a 10 percent rate, the tax would raise $191.5 billion over six years, $31.9 billion per year, to finance Trump’s original infrastructure spending proposal.

However, Trump this week declared that he would spend double what Clinton has proposed on infrastructure. NTUF assumes this would supersede his original spending level, bringing his annual total to $110 billion. This would be financed through issuing new Treasury bonds to investors. Essentially, Trump plans on financing infrastructure improvements by taking on more debt that would be owed to bondholders, which present a challenge to his promise to reduce the deficit.

When candidates propose to spend more money than their opponent on any given issue, taxpayers should be on alert that ultimately they are on the hook, either immediately through new taxes or later through higher net interest payments on the national debt. Finding ways to improve the nation’s infrastructure that allows states and localities to shape funding and implementing plans around their specific situations would result in a lower cost and a more responsive service to taxpayers.