Trump Wants a Giant 'Infrastructure' Tax Break for Wall Street. Will Chuck Schumer Stop Him?
Senator Charles Schumer makes his way to the Senate Policy Luncheons in the Capitol, November 29, 2016.
Tom Williams for Roll Call / Getty Images
One of Donald Trump’s first acts as president could be giving billions in tax breaks to private equity under the guise of repairing roads and bridges, and New York’s own Chuck Schumer, leader of the Senate Democrats, could be the key to making it happen.
“It's going to be one of my priorities,” Schumer told reporters on a conference call at the end of November. “We need to pave the way for an infrastructure deal,” he added.
Far from being a reluctant warrior, Schumer is casting himself as Washington’s infrastructure kingpin, issuing a press release at the end of November saying he “stands ready to work with the incoming administration” on crafting a deal.
Barely two weeks later, Trump advisor and son-in-law Jared Kushner is reported to have said that Schumer aligns more closely with the incoming president’s infrastructure agenda than even Senate Majority Leader Mitch McConnell. When ABC News asked Schumer about Kushner’s claim, New York’s senior senator didn’t dispute it. Then, for good measure, he added that the scale of Trump’s preliminary proposal, advertised at $1 trillion, “sounded good to me.”
Schumer has assured the public he will drive a hard bargain by opposing social program cuts to offset new infrastructure spending, and said he favors $1 trillion of direct federal funding, instead of private equity tax credits.
Despite the tough talk in his press release, Schumer is leaving himself lots of wiggle room to bless a Trump infrastructure bill with generous tax cuts for Wall Street. When asked if having a private equity tax credit in the infrastructure bill would be a dealbreaker for Schumer, who has been so eager to talk infrastructure lately, his spokespeople declined to speak on the record, saying they won’t comment on a bill that doesn’t yet exist.
Then there’s the fact that Trump’s “trillion dollar” infrastructure plan isn’t really a trillion dollars at all, but actually $137 billion of private equity tax cuts sought by campaign advisors.
Chief among the incoming administration’s plutocrats is private equity investor Wilbur Ross, a billionaire enamored with what he called Trump’s “radical, new approach to government,” who is in line to be commerce secretary. Less than two weeks before the election, Ross teamed up with economist Peter Navarro, who has since been named Trump’s trade advisor, to author a 10-page infrastructure plan.
They propose giving an 82 percent tax credit — which works out to being a $137 billion tax break — on private equity infrastructure investments, with the goal of supporting loans for $1 trillion worth of projects. The public would fork over tolls and fees to pay back the loans while also providing a nice profit for investors. Ross and Navarro say the plan would pay for itself by spurring new tax revenue from construction wages and profits.
If you think a private equity tax cut made up of free money is a magic fix for decaying infrastructure, there is a bridge Mr. Trump would also like to sell you. For starters, lots of infrastructure, like mass transit and local roads, are necessary but unprofitable. As a result, private investors often steer clear, instead focusing on shiny projects like toll highways.
“It raises a lot of questions about how our transit systems are going to be run, and for whose goals,” said Veronica Vanterpool, executive director of Tri-State Transportation Campaign, a regional pro-transit advocacy group. “I am concerned that our system is going to fall into disarray while the emphasis is put on glitzy new projects.”
Even groups that are more eager to embrace private financing, like the lobby for New York’s construction industry, are skeptical of Trump’s plan.
“When you’re getting tax credits, you’re giving up revenue somewhere else. My first take is, it’s not a win-win,” said Richard Anderson, president of the New York Building Congress.
While Anderson says he appreciated the bipartisan agreement that infrastructure needs more attention, he said it comes down to a simple problem: “We don’t have enough money.”
“These projects cost money. You can’t get around that,” said Kevin DeGood, who serves as director of infrastructure policy at the left-leaning Center for American Progress and released a report criticizing Trump’s plan. “Part of the hand waving of financiers and the Trump administration is trying to convince you that they have an anti-gravity machine.”
Public-private partnerships aren’t always a bad thing. The right contract structure can keep down costs and speed up construction, Anderson and DeGood said, particularly on large, multi-billion-dollar projects. But it’s not a cure-all.
America doesn’t need a tax break for private equity profiteers to back infrastructure loans, DeGood said, because cities and states can already borrow money, tax-free, on the bond market. The problem is that all too often, voters aren’t willing to support the taxes and tolls necessary to pay off the loans.
In fact, Congress has kept the federal gas tax stuck at 18.4 cents per gallon since 1993, relying on transfers and patches for the Highway Trust Fund. A number of cities and states have raised gas taxes and passed ballot measures for roads and transit, but ideas to boost revenue have died in both Albany and Washington.
“If you rely on 50 different governments and their municipal subsidiaries and special districts, you’re going to have a hodge-podge,” Anderson said. “You need national leadership.”
The Hudson Yards LIRR rail yard in 2015.
Metropolitan Transportation Authority / Patrick Cashin
The question is whether it makes sense to cooperate with the type of leadership a President Trump will provide. The billionaire president-elect rode to power with a campaign that stoked racism, Islamophobia, xenophobia, misogyny, and isolationism — and he shows little sign of slowing down. Does it even make sense to cooperate with a president this unpredictable?
“That question is above my pay grade,” CAP’s DeGood said. “An infrastructure bill should not come at the expense of our core values, and that will be the starting point for us as we look at any potential package.”
“The rhetoric and the tone of this campaign was incredibly worrisome,” Tri-State’s Vanterpool added. Transportation can improve the lives of all Americans, including immigrants, the poor and the disabled, and she wants New York’s congressional leaders to stand up for mass transit as part of an infrastructure plan. “I haven’t heard that yet,” Vanterpool said. “I just heard people saying, ‘Infrastructure is important to us and we’re willing to work with the new administration.’”
Some New York advocates are even more explicit. In the week after the election, Transportation Alternatives sent an email to its supporters entitled, “We Stand with Black Lives Matter.” Riders Alliance sent a missive entitled, “We Are a Democracy Organization.”
Others are staying quiet.
“I don’t want to get into all that stuff — Trump calling people names,” Anderson, who represents the Building Congress, said. “Let’s stick to infrastructure.”
The Regional Plan Association and the General Contractors Association of New York both refused interview requests from the Voice. Transportation for America, which released a cautious statement on Elaine Chao, Trump’s reported pick for transportation secretary, also refused interview requests.
Even as Trump elevates a stable of conspiracy theorists, fringe media kingpins, and climate deniers, there is a pervasive wait-and-see attitude as to how our president-elect will negotiate the nuances of infrastructure policy. This hope-against-hope cowardice allowed Trump to score the GOP nomination and, ultimately, a surprise position as the most powerful person on the planet.
Schumer’s desire to be a dealmaker could lead him to run a triangulation play, cooperating with Trump on risky infrastructure and trade deals, but stonewalling him elsewhere. By handing Trump victories he couldn’t get from congressional Republicans, Democrats risk leaving voters with the impression that the narcissist-in-chief wrangled Washington, got things done, and Made America Great Again. The kindness of Senate Democrats will certainly be forgotten at the ballot box.
There’s still an opportunity for Schumer and Senate Democrats to grow a spine. The first big test after inauguration: confirmation hearings for key members of Trump’s team, including infrastructure honchos Elaine Chao and Wilbur Ross. Chao’s blind eye to wage theft and Ross’s private equity tax cut plan are ripe targets for tough questions.
It all depends on whether America’s highest-ranking Democrats are willing to rise to the challenge.
Senator Schumer, all eyes are on you.
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