Congress Taxes

GOP Leader Rules Out Paying for Things We Need

Written by SK Ashby

Congress recently passed a two-month extension to continue funding the federal highway system, but the conditions that necessitated a short-term extension persist.

House Majority Leader Kevin McCarthy (R-CA) acknowledged the need to fund the nation's infrastructure during an interview with the Wall Street Journal, but he has categorically ruled out a gas tax increase that would be used to fund the highway system for the next five years.

“Highway is a major problem in America,” he said. “We make policy in the world of politics. If you thought, “Well, why don’t you just raise the gasoline tax?” Well, politically that will not make it. Let’s think of something else. How do you have a funding mechanism where you could actually fund a five-year plan?”

Part of being a responsible leader is making the tough choices that may not necessarily be popular with your constituency of lobbyists.

While he may not be willing to make tough choices, McCarthy wishes to give the appearance that he is a responsible leader and, to that end, he has introduced an alternative funding proposal that is not as much of an olive branch as it is a bottle of snake oil.

McCarty [sic] said in the interview Monday that an alternative plan that would tax overseas corporate revenue is a more viable option to pay for a long-term transportation bill. The proposal, known as "repatriation," calls for giving business a reprieve from penalties for avoiding prior taxes if they agree to move money back to the U.S. and pay a 6.5 percent tax rate on it.

It may seem unbelievable that a House Republican would propose that we tax overseas profits, and that's because it is. There's a catch which I've highlighted above.

Under McCarthy's proposal, corporations would not be compelled to pay taxes on anything because they would not be compelled to move money back into the United States. It would be a voluntary tax.

Do you know any corporations that voluntarily pay taxes they are not required to pay? Some don't even pay what they're ostensibly required to pay.

If Congress passed McCarthy's proposal tomorrow, it would be a fiscal disaster. This voluntary repatriation proposal would create a situation where the federal government has authorized construction projects with no accountable funding mechanism to pay for it.

If Republicans are concerned about the long-term health of the highway trust fund, one way to kill it dead immediately would be to tie its funding to a voluntary corporate tax. The funding may materialize or it may not. It probably wouldn't.

The gas tax has not been increased since 1993.