Five Points

1.  America needs to build for its future.  The most dynamic, creative economy in the world, with flexible capital and labor markets, outstanding higher education and an open, receptive culture, this country contributes a disproportionate share to human progress globally.  But investment in infrastructure over recent decades has not kept up with current technology — roads, bridges and schools — nor prepared us for the next great jump in technology — with efficient electrical grids or widespread broadband.  Moreover, promising energy, bio and other technologies with uncertain future payoff potential compete for financing with short term, nearly sure things.

Investment in both infrastructure and technology for the long-term creates jobs, but also prepares the transportation, communication and other systems necessary to sustain private enterprise.  It therefore underpins sustained economic growth and social progress.  If we want more economic growth (and the tax revenue that comes from it), we must find the means to invest in these things.

2.   Americans need to build for their futures.  Every American with the means to do so understands the need to save for at least one of the following:  home ownership, education, retirement.  One might call these key elements of a family’s infrastructure.  The means available for the average American to accumulate savings for these purposes are limited and restrictive.  Passbook savings accounts pay interest rates well below the rate of inflation, and the gains are taxable income.  Savings for education (“529” and similar accounts) may only be expended for that purpose.  Savings for retirement can only be withdrawn for a limited few other purposes and are taxed and/or penalized, regardless of the financial difficulties in which the saver might find himself.  The price of higher education rises faster than the rate of inflation each year and universities happily inform sponsors of students that IRA savings can be used to pay.  But that means not only depleting future retirement resources, but also paying tax on the withdrawal, a double hit to the pocket.
Often when an individual saves money, s/he does not know for what purpose those savings eventually will be needed.  Restricting and/or penalizing the choice between socially desirable objectives:  home ownership, education and retirement is therefore an unnecessary restriction of freedom.

3.  The US national debt is too high and no one wants to pay more taxes.  The US owes the world about $16 trillion, a number that rises faster while economic recession keeps people out of the workforce and consumers out of the marketplace and depresses sales, profit and income tax revenue.  Debate rages over tax rates and inequality, but the bottom line is that no one wants to pay more taxes than they do now.  Debate also rages over whether “guns” or “butter” — the needs of the present — should get more funding. Funding investments in infrastructure and technology is does not make the list of urgent priorities.

4.  Corporations and people have at least one thing in common.  They both want freedom to deploy financial assets as needed and to pay as little tax on them as possible.  54% of Americans have money invested in the stock and bond market.  And there may be as much as $4 trillion in corporate cash sitting in liquid assets in the US or abroad.

5.  An INFRABANK could suit our times and fund the future.
Suppose Congress and the Administration could agree to create an InfraBank, basically an investment bank, with some form of government insurance, but no substantial infusion of government funds.

Capital for the bank would come in the form of Certificates of Deposit, with a (minimum) FIVE-year term.  At the end of five years, the CDs, plus any return on the investment would be payable to the investors, tax free, and usable for any purpose.
CDs would be denominated in amounts small enough that even small investors could participate, so a private individual could purchase a $500 CD, as an investment in his/her future — education, home or retirement — and available whenever needed after five years, (as non-reportable income).

Corporations, too, could invest in five year CDs with all proceeds non-reportable income at that point.  But to attract corporate attention, InfraBank bonds could be purchased from the US Treasury at a 15% corporate profit tax rate, rather than the standard 35% rate.  If corporate demand exceeded an annual InfraBank quota of $500 billion, access to the bonds could be auctioned by Treasury.

With funding from both the public and corporations, the InfraBank would establish a transparent system for receiving and vetting proposals for investments.  Operating independently from both Congress and the Administration, the bank would chose projects based on objective criteria and with an opportunity for public comment.

It would employ a reasonable number of professional staff, but its senior most officer would by law be entitled to a salary that amounted to no more than 50 times the salary of the median income at the bank.  Bonuses would be available for superior performance, but would be limited to 1% of the bonus recipient’s salary.

The InfraBank would invest approximately 40% of its available capital in infrastructure projects in the 50 states and DC, usually taking a substantial but not exclusive role in financing and charging a moderate rate of interest.  Another 40% of InfraBank capital would be invested in emerging technologies, helping to cover the financial wasteland for new technology between the garage and the IPO. The last 20% of capital would be at the discretion of the bank, with 10% held as reserves.

There would be no tax levied on the activity of the InfraBank.  Its investment in America’s future would be benefit enough.  All investors, once invested in the bank in after-tax income, would receive both their initial capital and return on the investment tax free and unrestricted as to its future use.