Conventional wisdom in the Beltway, among pundits and in the media is that the Infrastructure bill will follow Tax reform.
However, the House and Senate Tax bills which just came out deal directly with the financing of Infrastructure.
This fact is not surprising, because a good deal of Infrastructure is financed through the tax code.
While the House bill shuns market approaches to infrastructure, the Senate bill promotes an approach that leverages scarce federal tax-payer dollars to bring in outside money from states, local governments, and private investors.
Much of this happens through the promotion (Senate) or doing-away-with (House) of what are called private activity bonds. These are simply a way of financing private infrastructure where the federal government pays less than 30 cents on the dollar for projects.
These bonds finance water, transportation, bridges, solid waste, as well as social infrastructure like cultural institutions, educational institutions, housing, and other areas.
When the State of Pennsylvania sought to fix 558 structurally deficient bridges, it deployed these private activity bonds in a way that brought federal, state, and private money to the table.
Examples big and small abound. These bonds are ingrained in so many aspects of our communities and serve them well, promoting basic health and well-being, economic growth and opportunity, and also jobs.
The broader approach of leveraging scarce federal dollars to get projects built through state, local and private money is the signature Trump approach.
Except at the political extremes, it enjoys broad based bipartisan approach. And, even those at the political extremes are not adverse to making exceptions. Even, politicians who succumb to doctrinaire politics at times, support these bonds when water pipes break and schools crumble. Massachusetts and Vermont use them.
I won't bother you with boring details, but other provisions like the end of the SALT exemption will impact upon school facility financing and additional infrastructure areas, as will things like advanced refunding of bonds, and others.
Importantly, the removal of the Alternative Minimum Tax will have a very positive impact upon private activity bonds.
It is surprising that we do not call the Tax bill also an Infrastructure one.
More to follow as the House and Senate seek to reconcile and duke it out on key Infrastructure provisions within the tax code.
If you would like additional information or if I can be of assistance thinking through how these changes impact upon your own institutional plans, please do per usual be in touch.