Boxer, Paul to Introduce Bill to Use Tax Repatriation For HTF
DALLAS -- 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.
All the additional revenue generated by the tax reform would be pumped into to the Highway Trust Fund, which supports most federal funding for state and local highway and public transit projects.
The Invest in Transportation Act of 2015 will be introduced in the coming weeks, the senators said, outlining their proposal in a release on Thursday.
Boxer said the measure would provide an incentive for companies to bring back, or repatriate, some of an estimated $2 trillion of foreign earnings.
"I hope this proposal will jumpstart negotiations on addressing the shortfall in the Highway Trust Fund, which is already creating uncertainty that is bad for businesses, bad for workers and bad for the economy," said Boxer, the ranking Democrat on the Senate Environment and Public Works Committee who plans to retire at the end of 2016.
The tax repatriation reform proposal is a bipartisan effort to provide additional funding to rebuild the nation's crumbling transportation infrastructure, Paul said.
"We can help fund new construction and repair by lowering the repatriation rate and bringing money held by U.S. companies back home," he said. "This would mean no new taxes but more revenue, and it is a solution that should win support from both political parties."
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%. The lower rate could be applied only to repatriations that exceed each company's recent repatriation average, and funds must have been earned in 2015 or earlier.
The multinationals will invest the foreign profits they bring into the U.S. on job-creating expansions, Boxer said.
"First, it will bring back hundreds of billions of dollars in foreign earnings that are sitting offshore, which can be invested here in America to create jobs," she said. "Second, the taxes paid on those earnings will be used to extend the Highway Trust Fund, which supports millions of jobs nationwide."
The after-tax repatriated corporate earnings could be used for capital projects, wages, pensions, public-private partnerships, and research and development expenses. The repatriated revenue could not be used for increased executive compensation, higher stockholder dividends, or stock buybacks for the first three years after the program ends.
All additional revenue generated by the proposed legislation would be dedicated to the HTF.
Boxer spokesman Zachary Coile said a revenue estimate will not be available until the Joint Committee on Taxation scores the text of the proposed legislation.
The current 10-month, $11 billion extension of the HTF's solvency expires May 31. Congress has transferred more than $60 billion from the general fund to the HTF since 2008 as gas tax revenues failed to keep pace with spending.
The Congressional Budget Office's latest long-term projection for the HTF said highway and transit spending from the fund will continue to exceed the gasoline and diesel tax revenues dedicated to it.
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.
On the House side, Rep. John Delaney, D-Md., this week plans to introduce a tax repatriation plan that would generate $120 billion for the HTF over six years.
The proposed Infrastructure 2.0 Act would cut the current 35% federal tax rate on overseas earnings to 8.75%.
The measure would also provide $50 billion to capitalize an infrastructure loan bank for local and state projects that Delaney included in legislation filed earlier this month.
The capitalization would come from the newly generated corporate tax revenue rather than the proceeds from 50-year taxable bonds issued by the Treasury, as he proposed in the earlier bill, H.R. 413, said Delaney spokesman Will McDonald.
"There are similar provisions but these are totally separate bills," McDonald said. "The Infrastructure 2.0 Act doesn't include the bond provision."
The proposed fund would provide loans, bond guarantees, and equity for state and local governments' infrastructure projects. Delaney said the $50 billion in the fund could be leveraged to provide $750 billion of assistance to local funding.
"The Infrastructure 2.0 Act is the new policy solution we need to break the legislative gridlock that's created clogged highways, crowded runways, and costly delays for entrepreneurs and workers," Delaney said. "With a looming Highway Trust Fund crisis ahead of us, it is clear that we need a new answer."