House Republicans have shelved a plan to pay for federal highway projects with an ambitious corporate tax reform proposal, and instead will save tax reform for another day.
“Those discussions will be separate from the transportation bill,” House Ways and Means Committee Chairman Kevin Brady, R-Texas, told the Washington Examiner.
Instead, lawmakers are scrounging around for other ways to pay for the full cost of federal highway projects, including a plan to eliminate $17 billion in payments the Federal Reserve makes to banks.
Just weeks ago, using tax reform to raise revenue for roads and bridges had been a bipartisan goal of House Speaker Paul Ryan, R-Wis., and Sen. Charles Schumer, D-N.Y., who is the Senate’s number three Democrat.
Ryan, who at the time was the House Ways and Means Committee Chairman, hoped the deal would pay for a significant portion of the highway bill and boost the American economy at the same time.
The plan called for a one-time tax cut on corporate profits earned overseas. The revenue generated from those taxes would be used to replenish the highway trust fund, which is has been significantly depleted due to a combination of aging infrastructure and diminishing gas tax revenue. But thanks to several factors, the Ryan-Schumer corporate tax deal fell through.
Republican and Democratic aides said the two lawmakers met several times to work on the tax plan, but failed to agree on exactly how much revenue the deal should generate.
“In order for Democrats to support international reform, it’s essential that it generate a significant level of revenue for infrastructure repairs,” an aide told the Washington Examiner. “We haven’t been able to agree yet on those funding levels.”
Ryan and other proponents of the plan faced opposition on the Republican side, most notably from Senate Majority Leader Mitch McConnell, R-Ky., and Finance Committee Chairman Orrin Hatch, R-Utah. The two lawmakers want to overhaul the tax code with the goal of using the revenue to lower taxes, not pay for infrastructure.
Ryan and Schumer were also hindered by constant deadlines to pass a highway funding bill. Congress kept extending the deadline by several weeks, but it was not enough time to secure a deal on tax reform.
Finally, Ryan in October had to suddenly drop the Ways and Means gavel when he was recruited to replace House Speaker John Boehner.
With the tax deal in limbo, lawmakers are left searching for ways to pay for up to three years of the six-year House bill. The first three years are funded with a combination of revenue from the 18.4 cent federal gas tax, selling off part of the Strategic Petroleum Reserve and other sources.
Republicans have rejected a proposal to raise the gas tax, but most lawmakers agree they must find a new funding source to replenish the highway trust fund.
“This is a six year bill without six years of funding,” Del. Eleanor Holmes Norton, D-D.C., said when House and Senate lawmakers met Wednesday to begin negotiating a final deal.
In the meantime, lawmakers aren’t giving up on corporate tax reform. Brady told the Examiner “the discussions continue,” with Schumer on a tax deal.
The Senate aide told the Examiner that Democrats are “still interested in pairing” tax reform with highway funding at some point, but added, “it’s unlikely international tax reform will make it into this round.”
