➤ The U.S. Congress should fund infrastructure stimulus through a user-fee system and potentially a tax on vehicle miles traveled, according to Kevin Dempsey, president and CEO of the American Iron and Steel Institute.

➤ The institute, which represents major U.S. iron and steel producers such as Nucor Corp. and Cleveland-Cliffs Inc., opposes an increase in the corporate income tax rate as part of any federal infrastructure stimulus.

➤ Dempsey said President Joe Biden should leave U.S. tariffs on steel imports intact no matter what happens with infrastructure legislation.

American Iron and Steel Institute President and CEO Kevin Dempsey. Source: American Iron and Steel Institute

Infrastructure is the talk of the town in Washington, D.C., and the iron and steel industries could play a key role in construction if any legislation is successful. The Biden administration plans to spend the summer selling its $2 trillion stimulus package to Congress. However, the American Iron and Steel Institute, which represents major U.S. iron and steel producers, came out against Biden's plan to pay for the endeavor at least partially through increasing the corporate income tax rate.

S&P Global Market Intelligence spoke with American Iron and Steel Institute President and CEO Kevin Dempsey on April 14 about how the iron and steel industries want U.S. infrastructure to be funded and whether the stimulus should impact ongoing steel tariffs. The following conversation was edited for clarity and space.

S&P Global Market Intelligence: Can you outline why U.S. iron and steel producers are opposed to funding infrastructure stimulus through a corporate income tax increase as proposed by the Biden administration?

Kevin Dempsey: Our focus on this has been, how do you put together a strong and sustainable infrastructure program for the long-term. That's important because the way the government has set up infrastructure in the past has been, you set up these trust funds like the highway fund. You have a dedicated revenue source to it through a user fee. That guarantees there is money year-in and year-out for these infrastructure programs, which are big, multiyear projects. Mostly it's money going to the states and then the states building the particular project. From the steel industry's perspective, where you want that money used to build the big steel-intensive infrastructure projects, you need that long-term funding certainty. The states need that.

The problem with any type of income tax pay-for is ... [it is money] going into the general treasury [funds]. That's money that is then divvied out to be used through the appropriations process for all different kinds of competing interests, and there's not the guarantee. Then you just have a transfer from the general treasury to the highway trust fund as the Congress has done from time to time over the years. [That's] sort of a second best solution. But the best approach is, we've had a user fee in terms of the gas tax that has not kept up with developments in the economy over the years.

We think the better approach that will work to fund long-term projects is to fix the user-fee system and make sure that is sustainable. There are a number of approaches to that. Part of it may be raising the gas tax or indexing it to inflation. Part of it is going to have to be something else like a vehicle-miles-traveled tax, some type of user fee that is not tied to gas. We think that is the best approach because it will ensure a long-term dedicated source of funding for infrastructure projects.

Who do you see as your allies in going that route? Raising the gas tax has been a contentious issue on the Hill, and it is unclear if Biden would support that plan.

Well, first I would say, in the business community there's actually quite broad support for that approach. This is the approach the Chamber of Commerce, the National Association of Manufacturers [and] lots of other groups have all supported. So there is broad support in civil society for a user-fee approach.

In Congress, anything that raises revenue is controversial. There have been some members of Congress, though, who are very focused on infrastructure, who have said positive things about looking at a vehicle-miles-traveled fee.

I think there are supporters. A lot of details still need to be worked out, so we're a long way from a specific proposal. But that's the type of approach, and it's probably going to require a couple buckets of funding. It would require the Biden administration to support it too but, you're right, the Biden administration has said they're not in favor of raising the gas tax.

American Iron and Steel Institute President and CEO Kevin Dempsey. Source: American Iron and Steel Institute

Do you think there should be, or will be, changes to ongoing trade actions made in tandem with an infrastructure package?

No, I don't think there should be changes made. These are two completely separate policy areas, and I don't see them being linked.

We're making great progress because of the tariffs. [We're] reopening mills that had been idled, rehiring workers, investing in new plants and equipment. There's been a lot of new investment in the steel industry, I think measured at about $15.7 billion over [a couple] years in new investment and upgrading existing mills tied directly to the steel tariffs being in place and stabilizing the import situation in the U.S.

It's also led to some significant industry consolidation with Cleveland-Cliffs Inc. acquiring the assets of AK Steel Holding Corp. and the U.S. assets of ArcelorMittal and U.S. Steel Corp. acquiring Big River Steel LLC. So the steel tariffs have allowed the U.S. industry to reinvest and reinvent itself. If we lift the tariffs, I'm afraid we'd go back to the old situation we faced before with the surges in imports, especially in light of the demand changes wholly because of COVID-19.