Senators Pitch Tax Changes on Overseas Profits to Fund Highways
Look to use potential revenue as source of funding for highways and infrastructure
A worker operates a Caterpillar hydraulic excavator during construction on Route 7 near Falls Church, Va. PHOTO: BLOOMBERG NEWS
WASHINGTON—Two senior senators Wednesday outlined a plan for overhauling the U.S. system of taxing overseas corporate income, and potentially using the revenue as a source of funding for aging highways and infrastructure.
Congress for years has struggled with how to cover the costs of maintaining federal highways bridges and mass transit. The Highway Trust Fund is currently financed with taxes on gasoline and diesel, but the tax wasn’t indexed for inflation and isn’t enough to cover costs.
The fund’s reserves are so low that the money is expected to dry up in coming weeks unless Congress comes up with additional resources.
Sens. Charles Schumer (D., N.Y.) and Rob Portman (R., Ohio), co-chairmen of a Senate Finance Committee working group on overhauling the international tax system, proposed imposing a one-time tax on profits that multinational companies have stashed overseas at a rate lower than the current 35% U.S. corporate tax rate. The one-time revenue would serve as a transition to a new system for taxing foreign profits.
The plan won initial support from House Ways and Means Committee Chairman Paul Ryan (R., Wis.), who said the idea “makes sense” because it comes “in the context” of “broader structural changes.”
Senate Majority Leader Mitch McConnell (R., Ky.), however, expressed reluctance to endorse the proposal.
In outlining the plan, which didn’t set specific tax rates, Messrs. Portman and Schumer are elevating an idea that has been endorsed by members of both parties.
President Barack Obama and former House Ways and Means Committee Chairman Dave Camp (R., Mich.) previously had offered similar ideas. Sen. Rand Paul (R., Ky.), a 2016 presidential contender, earlier this year also embraced a separate plan to use taxes on foreign earnings to pay for highways.
The proposal is unlikely to provide an immediate influx of money to the Highway Trust Fund, which the Congressional Budget Office estimated in March would face a $168 billion shortfall in 2025.
Mr. McConnell says any changes to the foreign-taxation system should be part of a broader tax overhaul and there isn’t enough time to come up with a wide-ranging tax revamp before the highway bill comes up for a vote on the Senate floor, likely next week.
“The best way to deal with the tax code in my view is comprehensive—an entire scrub,” Mr. McConnell told reporters on Wednesday, adding that he was “skeptical” about the prospects of the plan from Messrs. Portman and Schumer.
If the effort to use a tax overhaul to pay for road work fails, lawmakers likely will fall back on a patchwork approach to fund the program for the next six months to two years.
Still, the sponsors held out hope that the proposal eventually could find a path forward, even if the Republicans who control Congress decide against using a one-time tax on foreign profits to pay for a new round of highway spending when the money in the highway trust fund dries up.
“You’re beginning to see some consensus, but it has to grow before anything could take root,” Mr. Schumer said Wednesday.
