To: Governor Charlie Baker
Three Million Jobs NOW!
Our interstate highway system, created in 1956 by President Dwight Eisenhower, was a critical component of America’s rise to supremacy in the 20th century. On May 31st funding expires for the Highway Trust Fund (HTF) which bankrolls the maintenance, repair and construction of federal roads and bridges. Having the expiration so close at hand without a resolution is not unusual since HTF has been on short term emergency funding and in crisis mode for several years –the major contributing factor to the poor condition of our infrastructure.
Despite numerous and voluminous studies by the Department of Transportation, the Association of State and Highway Transportation Officials, the American Trucking Association and the American Road and Transportation Builders Association that have warned that the quality and quantity of US transportation infrastructure is deficient and in dire need of permanent long term funding, Congress has been incapable of agreeing on a financial plan that would restore our infrastructure to world class status. Its current status, as reported in a recent Ernst and Young survey, is an embarrassing 25th in the world. Experts like the American Society of Civil Engineers and Ernst and Young estimate a maximum of $1.5 trillion spread over ten years is required to rebuild our infrastructure.
Over the past several years there has been a plethora of discussions and reports about a long term permanent funding solution for HTF. These communications have included options such as public-private partnerships (PPP’s), vehicle miles travelled (VMT’s), infrastructure banks and increasing the current fuel tax. All of these options have failed to gain political traction because of significant downsides: PPP’s have been disappointing in Indiana, Spain and the United Kingdom; infrastructure banks have tax and governing complications; VMT’s are expensive to implement and administer and are intrusive; raising fuel taxes has little political or public support. Indeed, a Gallup poll found 67% of Americans opposed to raising fuel taxes which many characterize as extremely regressive.
Speaker John Boehner recently said: “We’ve got to find a way to deal with America’s crumbling infrastructure in a long term program that is in fact permanently funded.” Senator Corker echoes the same sentiment by saying in exasperation “there is not enough money coming in.”
Republicans and Democrats disagree vehemently over taxes. But they need to find a way to reconcile their ideologies in order to permanently fund HTF. Although taxation is the obvious funding solution, no issue divides our country more. Both political parties talk about tax reform but neither has endorsed any viable options. The no tax increase pledge by Republicans is a non-starter to meaningful discussions. The entitlements road map of the Democrats need to be altered. What is needed is a tax that , through its design, benefits all constituencies. Such a tax would, like Robin Hood, take from those most able to pay, invest in infrastructure, create millions of new high paying jobs, improve the standard of living for middle class Americans and result in enhancing investment assets for those who paid the tax.
Here’s how it would work:
First: As an initial step in tax reform, dispel the notion that the payroll tax is sacrosanct. Uncap the payroll tax (imposed equally on employees and employers at 6.2% and capped at $118,500 per person) for earned income of $500k and greater. At $500k, there will be an incremental tax increase of $23,660. Uncapping the tax will yield $120 billion per year based on research by the PERI School, University of Massachusetts.
Second: Invest the $120 billion per year for 10 years to create a world class transportation infrastructure.
Third: The $120 Billion will create 3 million jobs. Research by the PERI School. concludes each 1 billion dollars invested in infrastructure ( roads, bridges, water systems and public school buildings) will create 25,000 direct and indirect jobs. This new demand for workers will raise average weekly earnings improving the fortunes of the middle class.
Fourth: The additional 3 million jobs will decrease the unemployment rate by 1.9 points to 3.6%. Research by David Rosenberg, chief economist at Gluskin Sheff of Toronto, reveals a one percentage drop in the unemployment rate boosts the S & P index 500 returns by 3.4 percentage points. Thus the 3 million jobs will increase the S & P 500 index 6.5% (3.4 x 1.9).
Fifth: According to Fidelity Investments, people with earned income of $500k or greater have investable assets of $5 million. The good news--uncapping the payroll tax will increase these assets 6.5% or $300k!
Summary: Uncapping the payroll tax for incomes of $500k or greater will unlock the following sequence of events: $120 billion per year yield from the tax invested in infrastructure will create 3 million jobs which will boost the S & P 500 index 6.5% that will translate into a $300,000 g...
Despite numerous and voluminous studies by the Department of Transportation, the Association of State and Highway Transportation Officials, the American Trucking Association and the American Road and Transportation Builders Association that have warned that the quality and quantity of US transportation infrastructure is deficient and in dire need of permanent long term funding, Congress has been incapable of agreeing on a financial plan that would restore our infrastructure to world class status. Its current status, as reported in a recent Ernst and Young survey, is an embarrassing 25th in the world. Experts like the American Society of Civil Engineers and Ernst and Young estimate a maximum of $1.5 trillion spread over ten years is required to rebuild our infrastructure.
Over the past several years there has been a plethora of discussions and reports about a long term permanent funding solution for HTF. These communications have included options such as public-private partnerships (PPP’s), vehicle miles travelled (VMT’s), infrastructure banks and increasing the current fuel tax. All of these options have failed to gain political traction because of significant downsides: PPP’s have been disappointing in Indiana, Spain and the United Kingdom; infrastructure banks have tax and governing complications; VMT’s are expensive to implement and administer and are intrusive; raising fuel taxes has little political or public support. Indeed, a Gallup poll found 67% of Americans opposed to raising fuel taxes which many characterize as extremely regressive.
Speaker John Boehner recently said: “We’ve got to find a way to deal with America’s crumbling infrastructure in a long term program that is in fact permanently funded.” Senator Corker echoes the same sentiment by saying in exasperation “there is not enough money coming in.”
Republicans and Democrats disagree vehemently over taxes. But they need to find a way to reconcile their ideologies in order to permanently fund HTF. Although taxation is the obvious funding solution, no issue divides our country more. Both political parties talk about tax reform but neither has endorsed any viable options. The no tax increase pledge by Republicans is a non-starter to meaningful discussions. The entitlements road map of the Democrats need to be altered. What is needed is a tax that , through its design, benefits all constituencies. Such a tax would, like Robin Hood, take from those most able to pay, invest in infrastructure, create millions of new high paying jobs, improve the standard of living for middle class Americans and result in enhancing investment assets for those who paid the tax.
Here’s how it would work:
First: As an initial step in tax reform, dispel the notion that the payroll tax is sacrosanct. Uncap the payroll tax (imposed equally on employees and employers at 6.2% and capped at $118,500 per person) for earned income of $500k and greater. At $500k, there will be an incremental tax increase of $23,660. Uncapping the tax will yield $120 billion per year based on research by the PERI School, University of Massachusetts.
Second: Invest the $120 billion per year for 10 years to create a world class transportation infrastructure.
Third: The $120 Billion will create 3 million jobs. Research by the PERI School. concludes each 1 billion dollars invested in infrastructure ( roads, bridges, water systems and public school buildings) will create 25,000 direct and indirect jobs. This new demand for workers will raise average weekly earnings improving the fortunes of the middle class.
Fourth: The additional 3 million jobs will decrease the unemployment rate by 1.9 points to 3.6%. Research by David Rosenberg, chief economist at Gluskin Sheff of Toronto, reveals a one percentage drop in the unemployment rate boosts the S & P index 500 returns by 3.4 percentage points. Thus the 3 million jobs will increase the S & P 500 index 6.5% (3.4 x 1.9).
Fifth: According to Fidelity Investments, people with earned income of $500k or greater have investable assets of $5 million. The good news--uncapping the payroll tax will increase these assets 6.5% or $300k!
Summary: Uncapping the payroll tax for incomes of $500k or greater will unlock the following sequence of events: $120 billion per year yield from the tax invested in infrastructure will create 3 million jobs which will boost the S & P 500 index 6.5% that will translate into a $300,000 g...
Why is this important?
Let's make America strong in the 21st century and improve the fortunes of the middle class. A strong middle class is a strong America.