To Fix Our Roads, We Need to Repair the Potholes in the Budget
by Scott Klinger, 6/24/2014
In about a month, the nation’s Highway Trust Fund, the principal source of funding for repairing and rebuilding our country’s highways, will run dry. Paving projects across the country will grind to a halt, and construction workers, currently making good money, will join nearly 10 million of their fellow unemployed Americans.
Our nation spends $91 billion a year on road maintenance, but the Federal Highway Administration estimates $170 billion is needed to keep America moving. Nearly a third of our major roads are in poor or mediocre condition, according to a 2013 survey by the American Society of Civil Engineers.
Highway funds have run out because House leadership refuses to allow a vote on raising the nation’s gas tax. This 18.5-cent-a-gallon tax on fuel has not been increased since 1993. If it merely kept up with inflation, it would be 29 cents a gallon, according to estimates from the Center for American Progress.
Rather than considering raising the gas tax so we can repave roads and keep tens of thousands of construction workers on the job, some people in Congress would rather reward tax-dodging corporations. Senate Majority Leader Harry Reid (D-NV) and conservative Sen. Rand Paul (R-KY) worked together on a plan that would allow tax-dodging companies to bring back some of the $2 trillion they have stashed offshore by forgiving most of the taxes they owe on these funds. And Rep. John Delaney (D-MD) has been joined by 68 House co-sponsors from both parties on a proposal that rewards profit-shifting companies with large tax breaks if they agree to use a small portion of their repatriated profits to invest in long-term infrastructure bonds.
Instead of rewarding scofflaws by allowing them to keep almost all the profits on which they have avoided paying U.S. taxes, we should be boarding up the financial exit ramps out of the U.S. This would slow the $90 billion a year the nation loses when corporations use accounting tricks to shift the profits they earn in America to tax havens like the Cayman Islands. If we kept that revenue from leaving in the first place, we’d have enough to fix our roads without raising the gas tax, and we’d still have $11 billion left over to repair our kids’ schools or plug the leaks in our cities' aging plumbing systems.
We could also change the nation’s tax laws and close loopholes that allow giant corporations to take advantage of sections of the tax code intended to benefit small business owners. In the 1950s, Congress established “S corporations” to help “sole proprietors.” This tax designation allowed small business owners to take advantage of the limited liability protections afforded to larger corporations, meaning that if their businesses failed, the owners would lose all the money they invested in the businesses, but not their homes and personal property. S corporations also provided small business owners the opportunity to report income from their businesses on their individual tax returns. Rather than paying corporate income taxes and then paying taxes again on the dividends they took from the businesses, they paid just once. It helped to make the tax system fairer for small businesses.
Today, many big businesses are incorporated as S corporations and partnerships. One of the nation’s biggest S corporations is Bechtel, the world’s largest construction company and a beneficiary of highway construction contracts. Despite having $40 billion in revenues, Bechtel does not pay federal income tax because its profits are reported on the personal income taxes of owners of its stock. We need to repair this corporate loophole in order to fill the holes in the transportation budget and the actual potholes in our infrastructure. Allowing corporations to reincorporate as S corporations or partnerships to lower their taxes unfairly shifts the cost of paying for the public services these corporations depend on to middle-class taxpayers and community-based small businesses who can least afford it.
Finally, some conservatives in Congress have even suggested the way forward to “find more funds” for infrastructure projects is to repeal a provision in the Davis-Bacon Act, which requires that prevailing wages be paid on publicly financed construction contracts. Prevailing wage laws have helped build America’s middle class by ensuring that those who work hard can live a dignified life. Removing these protections, particularly during times of high unemployment, will send construction wages tumbling. Rather than finding more ways to turn good jobs into low-wage ones, it’s time for our elected officials to demand that the corporations that receive so much from operating in the U.S. pay their fair share to sustain public services and protect good, middle-class jobs in America.