Leading tax-writers in both chambers of Congress seek to resuscitate the Build America Bond program to help pay for an infrastructure bill, which could reduce the number of tax increases needed to pay for the legislation.
The White House released its infrastructure “American Jobs Plan” in March, and it proposed several tax increases on corporations. It did not specifically mention the use of Build America Bonds to help pay for the plan.
The fact that these bonds are now being discussed could mean that Democratic lawmakers are searching for ways to partially pay for an infrastructure bill and use fewer tax increases. A good reason for this pursuit is that many congressional Democrats worry that supporting tax increases could hurt their re-election bids in 2022, especially in the House.
A chief advocate for using Build America Bonds is House Ways and Means Chairman Richard Neal (D-Mass.). During Wednesday’s hearing on leveraging the tax code to pay for an infrastructure bill, the Congressman predicted that these bonds would likely be included in infrastructure legislation being crafted by his committee.
“Last Congress, the House passed a number of bond financing improvements that this Committee authored, including a permanent revival of Build America Bonds, reinstatement of advance refundings, and a holistic expansion of private activity bonds. I'm optimistic that this Committee will again secure the inclusion of a similar suite of provisions in any infrastructure financing legislation that comes to the floor,” he said.
Neal’s remarks come on the heels of a statement by Senate Finance Committee Chairman Ron Wyden (D-Ore.). On Tuesday, the Senator said that Congress should include Build America Bonds in paying for an infrastructure bill.
“Congress…ought to be looking at smart financing tools to help draw private dollars off the sidelines and into infrastructure. It worked a decade ago with Build America Bonds. Initially, projections said that only a few billion dollars’ worth of those bonds would sell. The number wound up being more than $180 billion. So that’s clearly an approach the Congress must return to as it works on infrastructure,” Wyden said in opening remarks at a Finance Committee hearing about financing options to pay for an infrastructure bill.
Sen. Mike Crapo (R-Utah), the Committee’s Ranking Member, suggested support for Build America Bonds.
“We should consider how PABs [Private Activity Bonds] and other bond programs can be used to help states and localities move their infrastructure projects forward,” he said.
Wyden took Crapo’s statement as an endorsement for Build America Bonds.
“We’re only 19 minutes into this morning's hearing, and we have already had an outbreak of major bipartisanship around Build America Bonds,” Wyden said.
The only leading tax-writer on Capitol Hill who does not support the use of Build America Bonds is Rep. Kevin Brady (R-Texas), the Ranking Member on the House Ways and Means Committee. Brady recently called these bonds “overly rich subsidies” and that there are “better approaches to attract private investment.”
Build America Bonds expired in 2010. Before expiration, the interest on these bonds was not tax exempt at the federal level, but the yields were much higher than Treasuries, making them an attractive investment.