Unlikely Duo Propose Alternative to Obama's Tax to Fund Infrastructure

"Sens. Barbara Boxer, D-Calif., and Rand Paul, R-Ky., plan to introduce legislation that would lower the federal tax on offshore corporate earnings returned to the U.S. to generate billions of dollars for transportation infrastructure projects," writes Jim Watts for The Bond Buyer. "Boxer said the measure would provide an incentive for companies to bring back, or repatriate, some of an estimated $2 trillion of foreign earnings."

Unlike President Obama's 14 percent "one-time, mandatory tax on previously untaxed foreign earnings" included in his 2016 federal budget proposal that he announced on Monday, the forthcoming Invest in Transportation Act will be a repatriation tax, that is, it taxes only the funds earned overseas by corporations that are returned to the United States. Revenue from both taxes would be directed to the Highway Trust Fund.

The Paul-Boxer plan amounts to a "tax holiday," which President Obama opposes, as does Sen. Orrin Hatch, chairman of the Senate Finance Committee. He "said the repatriation plan would cost the federal government more in the long run than it brings in for transportation projects," writes Keith Laing of The Hill.

"The repatriation legislation would allow multinational corporations to voluntarily return their foreign earnings to the United States over the next five years at a tax rate of 6.5% rather than the current 35%," writes Watts.

We can help fund new construction and repair by lowering the repatriation rate and bringing money held by U.S. companies back home," (Sen. Paul) said. This would mean no new taxes but more revenue, and it is a solution that should win support from both political parties."

According to transportation reporter Heather Caygle in Monday's Politico Morning Transportation, "the president’s proposal is closer to Rep. John Delaney’s bill. The rates are different — companies would be taxed at a lower rate in the Delaney bill [8.75%]— but both plans have a mandatory tax, shore up the Highway Trust Fund for six years and are couched in a broader overhaul."

Ideally, an increase in the federal gas tax, such as the bipartisan Corker-Murphy plan in the Senate, would erase the Highway Trust Fund shortfall, i.e., the difference between between gas tax receipts and transportation expenditures.

According to Watts, "CBO estimated the annual HTF revenue shortfall at $13 billion in fiscal 2016, $14 billion in fiscal 2017 and 2018, and $15 billion by fiscal 2019."

Alternatively, motorists could drive more in less fuel efficient vehicles, burning more fuel and thus increasing gas tax receipts, though that would defeat President Obama's climate goal of reducing greenhouse gas emissions.