US tax reform proposals threaten viability of economic development initiatives: Eric Peterson

Economic development advocates, infrastructure developers, local elected officials, governors and members of state legislatures should be motivated to let their representatives in the US Congress know of their concern regarding proposals included in both the outlines of the House and Senate tax reform proposals as far as impact to efforts aimed at creating jobs, rebuilding infrastructure and promoting the competitiveness of American industry.

In the first instance, the tax reform proposals push the national debt $1.5 trillion further into the hole, depriving resources to address education, infrastructure, social support and defense needs.

In the second instance, the tax reform proposals are predicated on the notion that cutting taxes drives long-term job creation.  There is little historic record that suggests that job creators are motivated to create more jobs based on a temporary trade-off of lower tax rates in exchange for giving up certain tax loopholes and credits.  In fact, noted Heritage Foundation economist and advisor to President Trump on tax policy said as recently as Friday, November 10^th, at a Republican Business Roundtable in Northern Virginia that the biggest factor holding back job creation is the absence of qualified candidates for the jobs companies are currently trying to fill.

Finally, passing tax reform for the sake of passing tax reform is not good public policy.

In the recent history of Congressionally reformed tax policy (1960 to 1996) the durable reforms that were adopted in 1986 had specifically identified, and transparently established policy objectives.  The current proposals being readied in the congress have neither. 

In fact, a recent article in Governing Magazine lamented that there are potentially many elements included and omitted that could have contradictory impacts on some of the president’s other priorities, most notably infrastructure.

Among the items listed were the proposed abolition of private activity bonds that are a critical tool for public-private partnerships and that have been used by businesses and state and local governments to finance a wide range of projects including roads, highways, housing, hospitals and airports.

Other potential changes include ending the electric vehicle tax credits and the reduction of the commuter tax deduction that enables businesses to extend parking and transit benefits to their employees without those benefits being taxed as ordinary income.

And the proposals don’t address the most important infrastructure crisis of the day; adjusting the federal gas tax that fuels the federal highway trust fund, providing critical financial resources to states for road construction and maintenance. 

Certainly a case can be made for simplifying the federal tax code…and it should be simplified.  But there is no rational justification for the kind of reform the Administration and Congress are currently pursuing.  Just because reducing taxes is popular, reducing taxes and promoting tax reform are not synonymous.  It’s important that Congress be deliberate in identifying what it really hopes to achieve, and adopting legislation that achieves desired tax policy objectives.

GLDPartners, through its Washington office assists airport and seaport authorities, economic development entities, local governments and transportation infrastructure leaders understand how to navigate federal support and regulation.  We would be happy to confer with you about the potential impact of pending tax proposals to policy and project delivery to your projects.