A tax break that would encourage companies to repatriate offshore earnings likely wouldn’t yield enough money to plug the shortfall in the U.S. Highway Trust Fund, said the chairman of the Senate Finance Committee.
Senator Ron Wyden, an Oregon Democrat, is trying to find a way to shore up the fund for U.S. highway construction projects before it runs short of money as soon as July. He said in a telephone interview late yesterday that he hasn’t settled on an idea and that senators want to ensure that a short-term patch could “segue” into a more permanent solution.
“You do not pay for roads and bridges and transit with imaginary savings,” he said. “There isn’t any magic money sitting around on the street corner.”
A one-time tax holiday on offshore earnings would cost the U.S. government $96 billion in forgone revenue over a decade, according to the Joint Committee on Taxation. Wyden said he’s encouraging lawmakers to look at the “hard information” showing that a 2004 tax holiday wasn’t the “repatriation rainbow” that supporters promised.
A version being considered by Republican Senator Rand Paul of Kentucky and Senate Majority Leader Harry Reid would raise $3 billion over 10 years, only enough to pay for a few months of highway spending, Wyden said.
That proposal also would limit interest deductions for some companies, including those borrowing domestically to avoid tapping foreign earnings.
The idea of using offshore earnings to help shore up highway funding has a “good deal of support” among Senate Republicans, Minority Leader Mitch McConnell of Kentucky said June 10.
“Figuring a way to get those profits home and dedicating that money to a good purpose is something we’ve had a number of discussions about,” McConnell said.
Reid, a Nevada Democrat, said June 10 that he was deferring to Wyden, calling him the “ultimate decider.”
Under U.S. tax law, companies owe taxes on their worldwide income. They can get tax credits for payments to foreign governments and don’t have to pay the residual U.S. tax until they repatriate the money.
As of earlier this year, 307 large U.S.-based companies held $1.95 trillion in accumulated profits outside the U.S., up 11.8 percent from a year earlier. Companies with the largest stockpiles include Apple Inc., Microsoft Corp. and Pfizer Inc.
Wyden has asked members of the Senate Finance Committee to submit their ideas for boosting the U.S. highway trust fund, both in the short term and to help offset the costs of a long-term highway and mass-transit measure.
Another Senate panel has approved a six-year measure that would provide the same amount of money each year as in the current two-year, $105 billion legislation that expires in September, plus inflation.
Members of Wyden’s panel also want to finance a stopgap infusion into the trust fund. It will run short of money to meet obligations as soon as July as the gasoline and diesel-fuel taxes that finance the program haven’t kept up with the pace of new projects.
At a closed-door meeting last week, lawmakers discussed options ranging from a boost in the current 18.4-cents-per-gallon gas tax to a new tax on barrels of oil at the wholesale level.
Senator Tom Carper, a Delaware Democrat, said June 10 he’s pushing other lawmakers to consider an approach that helps put the cost on highway and mass transit users.
“I’d like it to be user-fee based,” said Carper.
Wyden said he met yesterday for an hour with Senator Orrin Hatch of Utah, the top Republican on the Finance panel. Hatch declined to comment yesterday on his ideas.
Wyden and other members of the tax-writing committees in Congress have been trying to reserve changes to the international tax system for a broader revamp of the tax code.
The only version of repatriation that raises a substantial amount of money, Wyden said, is one that includes a minimum tax on overseas earnings.
“That could probably raise you a boatload of dough, but business is pretty strongly opposed,” he said.
Wyden also has opposed a plan from House Republicans that would use savings from changes to the U.S. Postal Service to plug the gap in the highway fund.