Highway Funding Could Be Backdoor to Corporate Tax Reform
Policy + Politics

Highway Funding Could Be Backdoor to Corporate Tax Reform

With funding for the Highway Trust Fund set to run out at the end of the month and lawmakers scheduled to be out of town on a break when it does, the House on Tuesday approved a two-month extension of the existing funding. The Senate is expected to agree to the measure, and the president will likely sign it, meaning that even if no future planning for infrastructure spending is authorized, at least ongoing projects can continue.

It was a move that attracted derision from across the political spectrum. On Tuesday, before the vote, former New York Mayor Michael Bloomberg said at the Peter G. Peterson Foundation’s 2015 Fiscal Summit that short-term extensions show “Congress is doing the bare minimum: Kicking the can down a pothole-filled road.” Secretary of Transportation Anthony Foxx noted on Wednesday that, should it pass as expected, this would be the 33rd short-term extension of the program.

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Senate Minority Whip Dick Durbin (D-IL) said: “What the Republicans have given us now is an opportunity for America to patch its way to prosperity. They believe that if you fill enough potholes you can actually build a highway.”

But in little-noted remarks on Tuesday, House Majority    Kevin McCarthy (D-CA) said the short-term deal on highways might turn out to be an opportunity in disguise – offering lawmakers a chance to secure long-term infrastructure fund at the same time that they deal with reforming a corporate tax code that is widely viewed as outdated and damaging to U.S. competitiveness.

“Our infrastructure is old in America,” McCarthy said at the Peterson Forum in Washington. “If you do a short term [extension], it doesn’t solve the problem. We want to have a long-term infrastructure [bill], but it takes resources. So where do we get the resources? Well, one of the ideas that has been growing out there is repatriation. Could we utilize that for infrastructure?”

By “repatriation,” McCarthy was referring to the fact that U.S. corporations have more than $2.1 trillion in untaxed profits stashed overseas in order to avoid the 35 percent corporate tax that would be levied if the money were returned to the U.S.

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A number of lawmakers and academics have proposed a deal under which companies are allowed to bring the money home at a reduced tax rate, with the ensuing windfall to the government dedicated to recapitalizing the Highway Trust Fund.

McCarthy suggested tax reform and infrastructure are an obvious fit.

“Where are we going to get more money?” he asked, referring to the country’s ongoing infrastructure needs. “We cannot pass a higher gas tax. Where are you going to grab the money from? We’ve got a challenge with our tax code.  These are two problems, but there are also two solutions.”

Asked if such a deal were really feasible, McCarthy said, “I see a needle I can get through.”

As the man in charge of assembling workable alliances in the House, McCarthy said,

“I look at everything in coalitions.”

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He said there is a large coalition behind funding highways, and another large coalition behind reforming the business tax code. “So…if you moved highways to the end of the year and you matched that up with enough time for tax reform, you could gain something very big and solve a lot of problems [for] people on both sides of the aisle.”

Not everyone, though, was convinced that a tax reform package is achievable by yearend, much less by the end of July. House Minority Whip Steny Hoyer (D-MD) was pessimistic about the chances of finding quick agreement on tax reform.

Others, like New Jersey Democratic Rep. Bill Pascrell, told The Hill newspaper that he didn’t even have confidence Congress would be able to write a long-term highway finance bill by the end of July.

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