Doubts running high for tax push

Senate Republicans insist they’re deeply skeptical of Rep. Paul Ryan’s push for an agreement on international tax reform, but acknowledge a plan with bipartisan support would be hard to turn aside.

With the Senate’s own highway bill is only funded for half of its six-year span, Republicans said this week that they would have to take a look at anything that could get them to a fully financed infrastructure bill.

“I approach it with a fairly high level of skepticism,” said Sen. John Thune (S.D.), the No. 3 Senate Republican.

“But let them take their shot,” Thune added. “I wish them well, because it’d be great if they could pull it off.”

Not all Senate Republicans agree, underscoring just some of the hurdles Ryan and his allies face. President Obama’s administration has backed Ryan’s efforts, and Sens. Chuck Schumer (D-N.Y.) and Rob Portman (R-Ohio) have released their own framework that dovetails with Ryan’s ideas.

The Senate’s top two Republicans, Majority Leader Mitch McConnell (R-Ky.) and Majority Whip John Cornyn (R-Texas), have both suggested that they’re unlikely to be a fan, even if Ryan can strike a deal to revamp how the U.S. taxes multinational companies and find an influx of infrastructure revenue in one fell swoop.

Other Senate Republicans add that there’s little reason to believe that Ryan (R-Wis.), the House’s top tax writer and a top GOP voice on fiscal matters, will be able to find enough common ground in talks with Obama and Schumer, who’s in line to be the next Democratic leader.

“I’m not against working with them,” said Senate Finance Chairman Orrin Hatch (R-Utah). “I just don’t think it’s the way to go right now.”

After the most recent short-term highway punt, lawmakers now have until the end of October to hash out a potential six-year deal.

Senate Republicans have urged the House to pass its own six-year highway bill, which would allow the two sides to negotiate a compromise in a conference committee. Rep. Bill Shuster (R-Pa.), the chairman of the House Transportation Committee, has only said that he wants Congress to finish off a long-term bill “as soon as possible.”

Ryan and his allies on this particular issue say Congress has a rare chance to find long-term infrastructure funding, and fix another burgeoning crisis – a tax system so antiquated that it’s giving companies an incentive to flee.

And despite the high-level Senate opposition, lawmakers who want to give the tax reform-highway combo a try also believe skeptics would be won over if a deal is reached.

“I’ve always said that tax reform has got to have a galvanizing event,” said Sen. Ron Wyden (Ore.), the top Democrat on the Finance Committee. “International tax reform and transportation is something that appeals to people. But there are a lot of pieces to the puzzle.”

Those pieces include the details of any international tax plan, which still need to be worked out. But the framework of a deal includes a system that shields offshore corporate income from U.S. taxation, while also putting in safeguards to discourage the use of tax havens.

The more than $2 trillion that corporations currently have stashed offshore would be taxed at far lower than the 35 percent corporate rate to pay for road projects — a key feature for Democrats.

And Congress would install a new low rate for income stemming from intellectual property, to ward off international pressure for both jobs in the high tech and pharmaceutical sectors and revenue from multinational corporations.

Tax observers speculate that Ryan and his partners face an uphill climb to gain traction for their efforts during a condensed fall schedule likely to be dominated by government funding, Iran and even an unprecedented visit from the pope.

But even if they are successful, McConnell has told lobbyists that he’s dead set against linking highways and tax reform. Publicly, he’s said that the international tax issues are serious enough to be dealt with on their own, and that he wants the sort of comprehensive overhaul of the tax code that’s unlikely as long as Obama is in office.

“If it’s an emergency, we’ll have to deal with it,” McConnell said last week about the international tax system. “I’m skeptical that that can be shoehorned into a multi-year highway bill by the end of the year.”

Cornyn has voiced another concern on the right: that hitting up the offshore profits for roads is nothing more than a punitive tax cut. “People are coerced to bring the money back, but I think there’s a better way to do it,” Cornyn told reporters on Tuesday.

But while Hatch says he has his doubts about what Ryan can negotiate with Democrats, he added: “If it’s right, we’d be happy to take it up.”

Politically, Ryan likely won’t have to face opposition from a key GOP ally, the small business community, which came out strongly against broader business tax reform.

But there are other political challenges in crafting a deal that could easily be construed as a tax cut for the largest corporations — and geared toward sectors, like the pharmaceutical and high tech industries, already known for aggressively lowering their tax bills.

The proposal for a new incentive for intellectual property, commonly known as an innovation box, could easily prove to be very expensive, likely causing added opposition.

“It’s a pretty tall order. You’re dealing with two entities there that usually your ceiling is their floor,” Sen. Pat Roberts (R-Kan.) said, referring to the White House and Senate Democrats. “So that’s a problem.”

“But if anybody could, I think Paul Ryan could probably do it,” Roberts added.