WH: Offshore taxes a ‘better strategy’ for funding roads

White House Press Secretary Josh Earnest said Tuesday that requiring companies to move overseas profits back to the U.S. is a more “reliable” source of funding for U.S. infrastructure than raising the federal gas tax.  

Transportation advocates have been pushing for an increase in the 18.4 cents-per-gallon gas tax as prices at the pump have fallen to their lowest levels in years. 

But Earnest said President Obama’s proposal to rely on “repatriated” corporate tax revenue would be a more predictable way to pay for infrastructure.

{mosads}“We believe that we just have a better strategy,” Earnest said of Obama’s repatriation plan. “Closing corporate tax loopholes and using that money to invest in the kind of infrastructure that we all benefit from, I think makes a lot of sense. It has a lot of appeal, I think … certainly to the president and to other people in the administration.” 

Obama is proposing legislation that would spend $478 billion to boost the nation’s infrastructure. The plan calls for spending $317 billion on U.S. roads and bridges over the next six years, including $94.7 billion during the 2016 fiscal year. The plan also includes $143 billion for federal transit projects and $18 billion on freight improvements.

The proposal would be paid for with the estimated $238 billion in revenue that would come from requiring companies to bring back earnings to the United States at a 14 percent tax rate.

Transportation advocates have argued that raising the gas tax, which has not been increased since 1993, would be an easier way to pay for infrastructure improvements.

The gas tax, which predates the highway system by about 20 years, has struggled to keep pace with infrastructure expenses in recent years as cars have become more fuel efficient.

The tax at the pump brings in about $34 billion per year. The federal government typically spends about $50 billion per year on road and transit projects, and transportation advocates have maintained that the larger figure is only enough to maintain the current state of U.S. infrastructure.

Earnest noted Tuesday that Obama administration has put in place fuel efficiency requirements for U.S. automakers that will eventually result in cars that are sold domestically achieving 54.5 miles-per-gallon, which will further exacerbate problems with the gas tax in the future. 

“I think the second thing is we also just need to be aware of the challenges associated with trying to fund infrastructure through the gas tax as, thanks in no small part to some of the initiatives that the president’s put forward, we’re finding that the fleet that’s on the road right now is more fuel-efficient, which means that they’re using less gas, which means that the gas tax is a less reliable source of that kind of funding,” Earnest said. 

Obama’s infrastructure plan is included in Obama’s $4 trillion 2016 budget, which was released on Monday.

Critics have said the repatriation plan would cost the federal government more in the long run than it brings in for transportation projects.

“Tax holiday proposals designed to pay for the transportation bill sound great until you look at the details,” Senate Finance Committee Chairman Orrin Hatch (R-Utah) said last week after Sen. Rand Paul (R-Ky.) and Barbara Boxer (D-Calif.) released a plan that was similar to Obama’s.

“After all, the Joint Committee on Taxation (JCT) has clearly detailed how a stand-alone temporary tax holiday would end up costing the government in the end,” Hatch continued. “Saying you’re going to use something that loses money to pay for anything is just wrong.”

The nonpartisan JCT has said that a tax holiday would generate about $20 billion in revenue initially. The analysis said the plan would ultimately cost the federal government about $96 billion, as companies would have more incentive to keep their profits abroad and wait for another tax holiday.

Supporters of the repatriation-for-roads plan see it as more politically viable than increasing the gas tax.

“The interstate highway system is of vital importance to our economy,” Paul, a likely 2016 GOP presidential candidate, said in a statement last week about his transportation plan. The repatriation in his plan would be optional, unlike Obama’s.

“All across the country, bridges and roads are deficient and in need of replacement,” Paul continued. “We can help fund new construction and repair by lowering the repatriation rate and bringing money held by U.S. companies back home. This would mean no new taxes, but more revenue, and it is a solution that should win support from both political parties.”