AASHTO Journal, 10 July 2015
Two senior senators on the revenue-raising Senate Finance Committee unveiled a proposal July 8 to revamp taxes on foreign earnings of U.S. corporations, opening the door for low rates on repatriated profits that could generate new revenue to pay for a multi-year highway bill in coming months.
The plan from Sens. Rob Portman, R-Ohio, and Charles Schumer, D-N.Y., drew immediate praise from the chairman of the House Ways and Means Committee, Paul Ryan.
Ryan: Encouraged by Portman-Schumer plan.But it drew a cooler response from Senate Majority Leader Mitch McConnell, R-Ky., who told Capitol Hill reporters he was “skeptical” because he thinks repatriation of foreign-held corporate earnings should be tackled only in the context of a broader reform of the entire U.S. code that includes changes in personal income taxes.
The proposal to replace the current 35 percent tax level for corporations’ foreign earnings with lower tax rates was in the final report of a Finance Committee “International Tax Reform Working Group” that Portman and Schumer co-chaired.
Bloomberg reported that Schumer, who is the third-ranking Democratic leader in the Senate, tied the plan to whether he – and potentially other Democrats – agree to support another short-term extension of the Highway Trust Fund before it expires July 31.
“We need to see some broad support that people would have confidence that over the next three or four months we could actually get the international tax reform bill done,” Schumer said July 9. “We’re beginning to see some support, but we would want to see some more support congeal over next few weeks and then I think a shorter term proposal would acceptable.”
Ryan, R-Wis., also told a July 9 Politico/Wells Fargo news forum – which was carried on C-Span – that he was encouraged by the senators’ proposal, which he said was similar to repatriation plans House Republicans have been working on in recent years.
Although others in Congress have proposed various repatriation plans to fund transportation investment, as has President Obama, Ryan said the Portman-Schumer framework “tracks with what the House has been doing for the last couple of years. And so we see that framework as sort of the essence of what it could look like.”
He added: “So the fact that you have a Democrat [Schumer] agreeing with sort of the Republic framework that we’ve been working on for a few years gives me a bit of hope.”
Ryan explained that repatriation could generate more than $100 billion in additional revenue to pay for a long-term highway and transit bill, and that it was possible for Congress to achieve that international tax reform later this year without waiting to try to restructure the entire U.S. tax code.
That onetime tax windfall from repatriation could provide “bridge financing,” Ryan said, to cover a six-year highway bill, and Congress could during those years come up with a user fee system to fund transportation afterward.