Letter: No Need for Adding Road-Fund Patches

This Letter to the Editor appears in the Aug. 10 print edition of Transport Topics. Click here to subscribe today. 

I agree there is no consensus on how to raise the money needed — probably $1.5 trillion to $2 trillion over 10 years — to fund rebuilding and enhancing our bridges and roads. It’s very clear that increasing fuel taxes won’t pass political muster (7-20, “Another Patch in the Quilt”). 

Here’s a creative plan that could avoid the need to keep patching the highway-funding quilt:

First, remove the cap (currently $118,500) on the payroll tax for earned income of $500,000 or more. This will yield an incremental $120 billion per year based on research by the Political Economy Research Institute at the University of Massachusetts, Amherst.

Second, invest the $120 billion a year for 10 years in road infrastructure which, according to the institute, will create 3 million direct and indirect jobs.



Third, the additional 3 million jobs will decrease the unemployment rate by 1.9 points. Research by David Rosenberg, chief economist at Gluskin Sheff and Associates of Toronto, concludes that a 1-point drop in the unemployment rate boosts the S&P 500 by 3.4 points. Thus the 3 million jobs will increase the S&P by 6.5% (1.9×3.4).

Fourth, according to Fidelity Investments of Boston, people with earned income of $500,000 or more, on average, have investable assets of $5 million. Removing the cap on the payroll tax will increase these assets by $325,000, so these taxpayers will benefit from the removal of the cap.

In summary, removing the payroll tax cap on incomes of $500,000 or more will unlock the following sequence: $120 billion a year yield invested in road infrastructure will create 3 million jobs, which will boost the S&P 500 by 6.5%, and that will translate into an initial gain of $325,000 for those who paid the tax increase.

Not a bad trade! Goodbye to potholes, congestion and wage stagnation. Hello to world-class infrastructure and improved fortunes for all Americans. It is a factual, logical and fair solution that should have political appeal in both parties.

John A. Simourian

Chairman

Lily Transportation Corp.

Needham, Mass.

 

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