The tax bill before the U.S. Senate includes some inexpensive but innovative pilot proposals to foster infrastructure privatization of school and highway facilities, say Heritage Foundation analysts. Such demonstration projects could lead to major improvements in how government cooperates with the private sector to deliver better public services.

The bill offers modest tax incentives to private-sector entrepreneurs to encourage investments of up to $15 billion in new highways and $27 billion in new public school buildings over the next 10 years.

• The Senate Finance Committee's proposal would create a nationwide demonstration program for a limited number of private investors and for-profit developers to borrow using tax-exempt private activity bonds to construct school classroom facilities they would lease to public school systems.

• The Highway Innovation and Cost Saving Act, introduced by Senator John Chafee (R-R.I.) and incorporated into the Senate's Taxpayer Refund Act, would allow the private sector to raise as much as $15 billion for new public- access toll roads.

The two privatization provisions account for only about $1.1 billion of the $792 billion in tax revenue reductions the Senate bill would produce. In other words, $1.1 billion in tax incentives would allow more investment in building schools and highways without any additional government spending.

Source: Ronald D. Utt, "How the Senate's Tax Bill Would Facilitate Infrastructure Privatization," Executive Memorandum No. 618, August 4, 1999, Heritage Foundation, 214 Massachusetts Avenue, N.E., Washington, D.C. 20002, (202) 546-4400. >

For more on Current Tax Legislation http://www.ncpa.org/pi/congress/cong2.html