This article elaborates on the importance of the high-speed rail network in the US and policies for raising capital for infrastructure spending.
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The section includes a brief documentary on the subject matter and its tremendous positive social impact on society. First, a high-speed railway network will reduce greenhouse emissions and builds on five sustainable development goals cementing principles of the UN Global Compact: affordable and clean energy (7), decent work and economic growth (8), industry, innovation, and infrastructure(9), sustainable cities (11) and community, and climate action (13). Second, bring down costs of domestic airfare, which are on an average higher than airfares in Europe. Further, generate jobs across all levels, i.e., labor and high-end engineering sector, and kick start economic growth to a new level.
Third, the construction of the vast railway network would boost supply-side inflation, addressing low inflation concerns in the US if they do arise. The proposed high-speed rail greatly enhances productivity by reducing travel time and promoting small and medium-sized companies across states, cities, and counties. Further, it gives people multiple choices to travel for business and leisure. Here, a re-look at the Solow model will significantly help the US. Let’s look at how the US can raise funds for the proposed infrastructure plan. One bipartisan way of raising funds would be to tax listed companies a surcharge tax between 0.75 to 1.25 percent on the profits layered according to companies’ revenues. One sad aspect of the reduction of taxes has been an increase in share buybacks rather than an exponential increase in allocation to capital spending and research. Share buybacks have become the best way of rewarding shareholders in the US since the ’90s and remain a contentious issue.
The tax policy called a 1 percent tax would generate billions of dollars in cash for infrastructure spending per year, considering the total stock of companies within the US ecosystem is in trillions of dollars.
The note was first published under Insights on The middle Road. Slightly revised version is posted here.
Recommended CNBC video on this topic
Image by Alexander Popov on Unsplash