The GOP tax bill unveiled this week doesn’t mention President Trump’s infrastructure plan, but it contains a number of provisions that could impact the administration’s rebuilding effort.
Some transportation advocates had hoped the package would set aside some money for the White House’s infrastructure proposal, which has yet to be released, or contain a fix for the ailing Highway Trust Fund, which is financed by federal fuel taxes that haven’t been raised in over 20 years.
Those items didn’t make the cut.
Worse, from the standpoint of groups that have been pressing for an infrastructure bill, the legislation did include provisions that could actually hurt efforts to upgrade U.S. roads, bridges and other public works.
Here are the top tax changes that could have major implications for the transportation sector.
Abolishing private activity bonds
For transportation advocates, one of the most disappointing tax provisions in the GOP measure would eliminate tax breaks for private activity bonds.
The bonds are considered a critical tool for public-private partnerships, which are supposed to be a cornerstone of Trump’s infrastructure bill.
Private activity bonds are issued for private projects and have been used by businesses to finance a wide range of infrastructure projects around the country, including roads, highways, housing, hospitals and airports.
San Francisco International Airport just issued $179 million of private activity bonds to help make facility upgrades.
And the American Association of Port Authorities said tax-exempt private activity bonds are expected to play a major role in helping its members and their private sector partners complete $155 billion in planned port infrastructure investment over the next four years.
But the bonds have also faced some criticism, with a GOP summary sheet saying, “the federal government should not subsidize the borrowing costs of private businesses.”
Under the GOP tax bill, interest on newly issued private activity bonds would no longer be tax-exempt. Ending the program would save $38.9 billion, according to a summary sheet.
There is growing concern that ending preferential tax treatment for the bonds could undermine the administration’s goal of incentivizing the private sector to help leverage $1 trillion worth of overall infrastructure investment in the U.S.
“This provision is particularly surprising as Congress and the Administration develop a new infrastructure initiative focused on attracting private-sector investment and encouraging public-private partnerships,” Richard A. White, acting president and CEO of the American Public Transportation Association, said in a statement on Friday.
“Instead, this provision would have a chilling effect on private sector investments in infrastructure projects.”
End of electric vehicle tax credits
House Republicans want to end a popular $7,500 federal tax credit for the purchase of electric and plug-in hybrid vehicles. It’s just one of several tax breaks Republicans would end as a way to help pay for their massive bill.
Supporters have praised the electric vehicle tax credit for reducing the price of costly, emission-free cars for consumers and helping the burgeoning American electric vehicle industry, especially as an increasing number of automakers have bet big on the technology.
Advocates have ramped up lobbying efforts in recent months in an effort to protect the credit, which has benefited electric vehicle manufacturers like Tesla. The credit is limited at the first 200,000 electric vehicles sold by each manufacturer, but no one has yet hit that cap.
“Electrification for vehicles is extremely important for the future of the auto industry, particularly given the fact that as we move towards autonomous, self-driving vehicles, those vehicles will be powered by electric,” said Sen. Gary Peters (D-Mich.), who represents America's automobile manufacturing hub. “That tax credit is really important for moving this technology forward.”
Less tax benefits for commuters
Under the GOP tax measure, businesses that offer parking or transit benefits to employees would no longer be able to deduct the cost of those expenses.
Some groups worry that the move will discourage businesses from offering commuter benefits, which can help defray transportation costs for working families.
But employees would still be able to receive untaxed transportation benefits or have them deducted as pretax income from their paychecks under the Republicans’ tax overhaul. The pretax contributions for transportation subsidies are capped at $260 per month.
Democrats and Republicans representing urban areas have long supported the benefit.
“This is a valuable benefit that provides savings to millions of American workers and their employers,” White said. “In many regions of the country, transportation costs are the second highest household expense.”