Looming highway debate stirs tax fight
A fight over raising taxes has bloomed as the chief obstacle to passing a desperately needed multi-year transportation bill by the end of next month, raising the specter of a possible shutdown of highway programs.
Senate Finance Committee Orrin Hatch (R-Utah), who is tasked with finding a way to pay for a multi-year deal, has ruled out the prospect of raising taxes, putting him on a collision course with Democrats.
Senate Democratic leaders have called for a six-year, $478 billion transportation bill paid largely by taxing overseas corporate profits.
They warn it would be “very hard” for them to accept another short-term extension of highway funds after having done so 33 times.
A bipartisan group of senators, including Senate Environment and Public Works Committee Chairman Jim Inhofe (R-Okla.), and Sen. Barbara Boxer (Calif.), the ranking Democrat on the panel, have proposed a less ambition six-year, $275 billion highway bill.
But Inhofe and Boxer are leaving it up to the Finance Committee to find a way to pay for a $90 billion funding shortfall not covered by federal gasoline and diesel taxes.
Lawmakers will have four weeks to solve the impasse before the Highway Trust Fund runs out of money on July 31.
The battle over tax increases will return to the forefront when lawmakers get back from the Fourth of July recess, now that the trade debate — which consumed May and June — is finally over.
“We hope we can get the highway bill done before the end of July,” Hatch told reporters but he identified the funding shortfall as a major obstacle.
He says a three- or four-year transportation bill is more realistic than the six-year proposals put forth by the president and Senate colleagues.
“I know one thing. It’s pretty tough to go six years. Six years is $92 to $94 billion,” he said.
“I hope it’s a multi-year, that’s all I can say, and I’m going to make it as long as we can,” he added.
Senate Democratic leaders are pushing the six-year transportation plan included in President Obama’s budget, which calls for $317 billion in spending on roads and $143 billion on federal transit projects.
They want to pay for it by requiring U.S. corporations to repatriate overseas profits at a 14 percent tax rate, which would raise $238 billion in revenue, and tax future foreign earnings at 19 percent.
“We’re asking them for their proposal. Here’s ours, what’s yours? Let’s not wait to get to that deadline again and do a short- term funding plan number 34,” said New York Sen. Charles Schumer, who is leading the Democratic messaging strategy in the transportation fight.
Senate Democratic leaders say the six-year, $275 billion bill sponsored by Inhofe and Boxer, which the Environment and Public Works Committee passed last week, does not go far enough.
“It’s a step in the right direction because it’s long term and it does increase funding, but not by enough to meet our needs and what Democrats would prefer,” said a Democratic leadership aide.
Sens. David Vitter (R-La.) and Tom Carper (D-Del.) are cosponsors of the measure.
Republicans want to pass a multi-year transportation bill, but a schism has emerged within their conference over the thorny question of whether they should raise some taxes to pay for it.
Republican Sen. Bob Corker (Tenn.) has called for increasing federal taxes on gasoline and diesel by 12 cents over two years and indexing it to inflation.
The gas tax now stands at 18.4 cents per gallon while the tax on diesel is 24.4 cents per gallon.
Inhofe and Senate Commerce Committee Chairman John Thune (R-S.D.) have not ruled out increasing the gas tax.
“John Thune made the statement that ‘nothing is off the table,’ and I agree with his statement,” Inhofe told reporters earlier this year.
The Commerce panel is responsible for about $1 billion a year of the infrastructure budget, according to a Senate aide.
But any proposal to raise taxes would pick a fight with the conservative base led by Grover Norquist, the president of Americans for Tax Reform.
Norquist said Congress would have more funding for highway construction projects if it wipes out the federal requirement established by the Davis-Bacon Act to pay local prevailing wages.
“There is zero chance the Republican House and Senate will increase taxes. Highway spending is 25% above what is needed due to Davis-Bacon prevailing wage law…. eliminate that and your funding problem disappears,” he said in a statement to The Hill.
“No need to raise taxes. This was tried in Michigan and Massachusetts and defeated by a vote of the people,” he added.
So far, Hatch is siding with Norquist and other anti-tax conservatives.
“We’re not willing to raise taxes,” he said. “I’m willing to look at everything but we’re not going to raise taxes to get there.”
Democrats believe, however, that House Ways and Means Committee Chairman Paul Ryan (R-Wis.) has signaled interest in paying for a multi-year transportation bill with corporate tax reform.
“Lots of other Republicans, including Paul Ryan, think international tax reforms that raise revenues are a good way to go. Democrats agree,” said a senior Democratic aide.
Ryan has opposed paying for increased transportation funding by taxing overseas profits because he wants to use the reservoir of funding for a broader tax reform initiative.
Earlier this month he downplayed the likelihood of a major tax reform package passing Congress this year.
House Majority Leader Kevin McCarthy (R-Calif.) said last month he is exploring options to pay for a multiyear infrastructure bill and acknowledged it would need to be partly funded with revenue increases.
Keith Laing contributed to this report.