Even as President Trump and Republicans in Congress seek to cut federal taxes, the White House has quietly come up with a very different plan for infrastructure: It wants to reward states and localities willing to raise taxes or other revenue to pay for new projects.
The dynamic is key to the Trump administration’s latest thinking on an infrastructure bill aimed at spurring a $1 trillion investment in the nation’s ailing roads, bridges, rail lines and airports. Originally touted by Trump as a first 100-days initiative — and one with the prospect for bipartisan support — it has stalled amid other bruising legislative battles.
The approach now being contemplated is considered innovative by some infrastructure experts but also carries considerable political and economic risks for Trump.
While some in his own party remain wary of any new spending, many state and local officials and Democrats in Congress would like to see a more robust federal investment. Washington would cover only $200 billion of the $1 trillion tab under the legislation being developed. Some also worry that taxes and fees raised at the local level could cancel out any potential benefits of a federal tax bill for their constituents.
“The state and local sector as a whole is already feeling beleaguered,” said Tracy Gordon, a senior fellow with the Urban-Brookings Tax Policy Center. “I’m not sure this is going to go over very well.”
As described by White House aides familiar with Trump’s initiative, additional federal funding would be available on a competitive basis for states and localities that submit plans outlining how they plan to raise new revenue dedicated to infrastructure.
Jurisdictions could raise their gas or sales tax rates, for example, or increase revenue flowing to infrastructure projects in a variety of other ways, such as imposing new tolls on roads or selling off existing assets to the private sector to generate money for new projects.
“We will be agnostic as to the type of revenue, as long as it is new and dedicated to infrastructure,” said one White House official, who spoke on the condition of anonymity to speak more freely about a plan the administration is not yet prepared to announce.
The White House’s vision of how to move forward on infrastructure has evolved over the past year, and officials say there could still be other changes before a bill is formally unveiled, likely early next year.
The$200 billion in federal funding would be spent over the coming decade, with the aim of leveraging at least another $800 billion from state and local governments and the private sector.
Earlier in Trump’s tenure, aides said that public-private partnerships would be key to spurring new projects. But Trump has since soured on the concept. Under the current thinking, jurisdictions could still engage in such partnerships but they would be no more likely to win federal incentive money than those that choose to raise taxes.