Newspaper article Roll Call

Repatriation Tax Holiday Is Not a Fix for Highway Trust Fund Insolvency

Newspaper article Roll Call

Repatriation Tax Holiday Is Not a Fix for Highway Trust Fund Insolvency

Article excerpt

All over the United States, construction crews are shaking off the winter cold and gearing up for a busy season repairing and expanding our transportation infrastructure. Yet, one ominous question remains: Will the Highway Trust Fund have enough money to keep them on the job?

The most recent estimates by the U.S. Department of Transportation show the trust fund running short before the end of the fiscal year. Moreover, as cash balances dwindle, the department will begin holding reimbursement payments to states. When the dollars run out, pink slips will soon follow - an unnecessary bit of self-inflicted economic pain.

The Highway Trust Fund faces major structural deficits stemming from dramatic improvements in vehicle fuel efficiency. As cars consume less gas, they also pay less in federal gas taxes, which are the main revenue source for the Highway Trust Fund. Meanwhile, federal gas tax rates have remained constant since 1993. By model year 2025, fuel economy will nearly double to 54.5 miles per gallon, meaning the current gas tax will be even less adequate. Congress needs to provide stable, long-term revenue for the trust fund.

Unfortunately, one idea gaining momentum is a corporate tax holiday on foreign earnings. Putting aside that a large share of "foreign" earnings already sit in U.S. banks and are the result of domestic transactions, a repatriation holiday is not a viable fix for our transportation needs. In fact, a tax holiday is the most costly and least fiscally responsible way to patch the trust fund. Offsets are intended to reduce the deficit, a tax holiday would actually cost the government billions of dollars over the next 10 years.

In 2011, the Joint Committee on Taxation examined similar repatriation proposals and found they result in substantially higher budget deficits, once the short-term revenue bump evaporates. …

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