Infrastructure talks are starting to gain momentum in Congress two weeks after President Joe Biden rolled out his sprawling $2.3 trillion infrastructure plan.
A Republican-led group of 20 lawmakers is gearing up to make a counteroffer in a bid to strike a bipartisan deal on a smaller package. Sen. Shelley Moore Capito of West Virginia floated one this week in the range of $600 billion to $800 billion. But there are fresh signs of discord among Republicans on the price tag and it's far from settled.
The sole factor binding them together is opposition to Biden's corporate tax hike. Capito called it a "non-negotiable red line," and other Republicans like Sens. John Cornyn of Texas and Susan Collins of Maine agreed they wouldn't budge.
Instead, they are suggesting potential "user-fees," a set of charges levied on the users of a federal service or good, such as raising the federal gas tax. User-fees have the support from the Chamber of Commerce, a powerful business group.
"My own view is that the pay-for ought to come from people who are using it. So if it's an airport, the people who are flying," Sen. Mitt Romney told reporters on Wednesday. "If it's a port, the people who are shipping into the port; if it's a rail system, the people who are using the rails; If it's highways, it ought to be gas if it's a gasoline-powered vehicle."
That could shift the financial burden of an infrastructure overhaul from companies onto people, Kevin DeGood, an infrastructure expert at the liberal-leaning Center for American Progress, told Insider. It has triggered intense resistance among Democrats.
"If the Republican position is that we're going only going to do this by raising the gas tax and we won't accept an additional penny of corporate revenue, that won't be something our caucus can get behind," a Senate Democratic aide granted anonymity to speak candidly said.
Pressing Republicans to roll back Trump tax cuts is like urging Democrats to repeal Obamacare
The US generally funds infrastructure — encompassing roads, highways, and public transit like commuter rail — through a blend of state and federal funding. Only about a quarter of spending on transportation and water projects stems from the federal government now, per the Congressional Budget Office.
That's down from a peak of 38% in 1977, leaving state and local governments to pick up more of the tab in recent decades. Biden's last two predecessors urged more infrastructure spending. Former President Barack Obama sought to close corporate tax loopholes to repair roads, bridges, and tunnels in a jobs plan, but Republicans lined up against it.
Now, a five-year highway funding bill expires in September, providing lawmakers with something close to a deadline to get their public-works priorities through Congress. Clashes are intensifying between Democrats urging tax hikes on corporations and high-earners, and Republicans pushing new fees on individuals.
Biden wants to raise the corporate tax rate from 21% to 28%, a partial repeal of Trump's 2017 tax law. Brian Riedl, a budget expert at the right-leaning Manhattan Institute, said Republicans were unlikely to support rolling back their biggest economic achievement of the past decade.
"Republicans worked extraordinarily hard to enact a major rewrite of the tax code," Riedl told Insider. "They're not going to reverse their signature policy to pay for Joe Biden's spending. That's like asking Democrats to repeal Obamacare to pay for a Republican tax cut."
He outlined a potential plan that would include repurposing unspent emergency stimulus funds to state and local governments, and moving federal money around in the annual budget.
Republicans floated a gasoline tax or a vehicle mileage tax on electric vehicles to finance infrastructure in lieu of business tax hikes. The federal gas tax hasn't been lifted since 1993, and a vehicle miles-traveled tax has never been implemented at the federal level. Only two states have it in place, The Washington Post reported.
Business groups favor spending on roads and bridges, but don't want to pay for it
Business groups generally want infrastructure spending, though targeted in scope. The Business Roundtable supports up to $1.5 trillion "to return US physical infrastructure to a state of good repair."
"There are clear benefits to business from additional infrastructure investing, but we also think it's unfair to ask business to shoulder or cover all of the additional costs of this public infrastructure investment," Brendan Bechtel, a leading figure in the Business Roundtable, told CNBC on Wednesday.
But experts say there is simply not enough to be raised through charging new fees on drivers or other types of road. "User-fees are not going to be sufficient and there are sectors that don't have them," DeGood told Insider. "For example, the Biden administration wants to put money into electrical transmission."
Republicans are indicating they will favor a package that's narrowly tailored to address roads, bridges, ports and other physical infrastructure. One Republican aide argued Democrats swelled the size of their plan, dampening the odds of a deal.
"I think this is going to turn into a slush fund for priorities for important constituencies and important members," the aide said. "You're going to get a much better work product if you have Republican senators involved in this. It will give it more longevity."
Still, some Democrats such as Sen. Chris Coons of Delaware said it may be possible to split off elements of Biden's plan and strike a $1 trillion bipartisan agreement, giving Democrats space to push through the rest using budget reconciliation in a party-line vote. GOP lawmakers wouldn't be likely to endorse that, according to Riedl.
"Republicans aren't gonna allow themselves to be chumps like that," Riedl said."They won't give bipartisan cover to a process that will run them over in the end using reconciliation."