Yesterday Republicans and Democrats announced they finally reached a deal to move ahead with a $1 trillion infrastructure package that would provide $550 billion in new funding for projects including roads and bridges, public transit, railroads, airports, and even high-speed internet.
“I’m pleased to see today we were able to come together on a core infrastructure package — this is not non-infrastructure items — without new taxes and with the commitment from Republicans and Democrats alike that we are going to get this across the finish line,” Sen. Rob Portman (D-Ohio) said in remarks Wednesday.
But if Congress isn’t raising taxes, how are lawmakers planning to pay for all this infrastructure funding? The White House said in a statement that the legislation will be financed using unspent unemployment insurance relief funds and federal emergency relief funds.
The unused relief funds from 2020 emergency relief legislation currently total about $1 trillion, according to Marc Goldwein, a senior vice president and policy director with the Committee for a Responsible Federal Budget.
“Roughly speaking, there’s probably about a $1 trillion of COVID money that’s been authorized, but hasn’t been allocated or disbursed,” Goldwein tells Fortune. “That does not mean there’s $1 trillion available to repurpose —some of that money hasn’t been spent because it just disperses over time,” he says, adding that includes measures such as the advanced child tax credit payments and enhanced unemployment benefits.
That means the amount of money from these unused relief funds that will actually be repurposed is “probably pretty small,” Goldwein says, likely less than $100 billion and closer to $50 billion.
In addition to unspent relief funds, the White House also noted that the legislation would tap targeted corporate user fees, as well as take advantage of proceeds from the increased enforcement of cryptocurrency taxes and reducing the IRS tax gap.
Lawmakers also plan to collect on 5G spectrum auction proceeds and a host of various fees and sales, including the strategic sale of petroleum reserves, profits from extending expiring customs user fees, and reinstating Superfund fees for chemicals, the White House said previously. States will also be allowed to sell and purchase toll credits, which are generated when states use toll revenues to invest in transportation projects.
The legislation is also expected to generate revenue from higher economic growth as a result of the investments, which lawmakers say will offset the cost.
But details on exactly how these financing tools would work or how much they would raise are still unclear. The Tax Foundation finds that the bill’s proposed spending on infrastructure would only generate a small amount of additional revenue, about a 5% return on investment. They estimated the previous $579 trillion package, which has been trimmed to $550 trillion now, would generate about $67 billion in revenue over 10 years.
“I think likely the bill is actually about half paid for,” Goldwein said.
Lawmakers, however, contend that the legislation would not be a drain. “This bill is paid for,” Portman said “We do it without raising taxes. We do it in a way that’s going to help in terms of our economy long-term, to make our economy more efficient, more productive.”
The Senate voted Wednesday night to start the process of getting the infrastructure plan through Congress, but the plan is not guaranteed to be implemented at this point and Senate Majority Leader Chuck Schumer (D-N.Y.) has noted that lawmakers may need to work through the weekend again to get it done.
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