The Real Cost of Rep. John Delaney's Infrastructure 2.0 Act (HR 2084)

Rep. John Delaney has proposed the Infrastructure 2.0 Act (HR 2084) highlighted as follows:

1. A one time 8.75% tax rate on repatriating offshore corporate profits.

2. A $50B infrastructure fund designed to leverage $750B through infrastructure banking schemes.

3. An 18-month deadline for international tax reform which, if missed, would slap a 12.25% tax on all offshore corporate funds whether repatriated or not.

This “Idea Whose Time Has Come” is not just Delaney’s idea; it is a bad idea. Delaney’s tinkering with the Repatriation Holiday is way above his pay grade and certainly beyond his public policy experience. More a measure of his ambition than an innovative and useful public policy measure, this proposal is half-baked as evidenced by its ignoring the most immediate and self-evident objection of an unfavorable currency exchange rate and by its inclusion of the proposed infrastructure bank whose details underscore the Congressman’s unfamiliarity with what is involved including the unintended consequences likely to unfold with a politically appointed board of directors and Presidential involvement.

Rep. Delaney boldly claims in the February 9 Washington Post article, “I looked at all the factors a while ago and said, ‘This is where we are going to go. People may not realize it, but they will’ “. Why then does he and the Washington Post not mention the drag his proposal will experience due to the unfavorable money exchange climate. Did Delaney ignore this factor or simply choose not to mention it, in the style of a K Street lobbyist faced with a stubborn and unpleasant facts. Delaney claims to be “thoroughly versed in the corporate world.” Yet skipping over the issue of currency exchange raises real questions about this claim especially since the purchasing power of the U.S. dollar has eroded by 16.27% in the past twelve months on the WSJ Dollar Index and its basket of major currencies.

The Infrastructure 2.0 Act with its immediate deadline will toss American corporations directly into the headwinds of a strong U.S. dollar which will further diminish the value of repatriated funds by 16.27% beyond simply the U.S. tax burden of 8.75% making the effective cost to American corporations with offshore funds a whopping 25%. The currency exchange rate is the elephant in the room never mentioned or acknowledged by Delaney or the Washington Post.

My recommendation to Rep. John Delaney and Congress is to stop trying to fund the infrastructure pork barrel with offshore corporate profits as it they are ill-gotten gains. They are not; they have been earned the old fashioned way.