The Final Countdown Redux
Those of you who grew up in the 1980’s will surely remember the hit song “The Final Countdown” by the band Europe with its signature synthesizer riff. As we enter the dog days of summer, we are once again faced with The Final Countdown for the Highway Trust Fund. For the 34th time since the last longer-term transportation bill was enacted six years ago, Congress is approaching the deadline for insolvency.
Congress passed the most recent extension in May, giving themselves an additional two months to come up with a sustainable solution. Unfortunately, this was not enough time to reconcile vastly differing perspectives on the optimum way to finance highway construction and maintenance as well as other transportation projects. Key issues holding up a compromise this time included the unrelated reauthorization of the Import-Export Bank and the proper role for the states versus the federal government. The main stumbling block, however, remains agreeing on what funding source should be used to raise the billions of dollars necessary to keep our nation’s roads and highway safe and to build new capacity for a growing population and increased commercial activity.
Although many Members of Congress support raising the gas tax for the first time since 1993, they’ve been unable to muster enough votes to pass an increase through either chamber. Too many Members fear the consequences that would befall them in a 2016 primary if they were to vote in favor of any type of tax increase, even one that is broadly supported by business and industry.
Without sufficient support for raising the gas tax, some Members have floated alternate funding approaches. The idea which has gained the most traction is a one-time repatriation of corporate profits being held overseas. Under this concept, U.S. corporations would be able to bring earnings back to the United States at a significantly reduced tax rate.
Few would argue with the need to overhaul the United States’ system of corporate income taxation. However, a one-time repatriation opportunity does nothing to resolve the deep structural flaws that beset the system. Nor does it address the fact that, at 35%, the U.S. continues to have one of the highest corporate income tax rates in the world, which discourages investment here at home. And importantly, revenue from a short-term repatriation would not provide the ongoing certainty that state departments of transportation need to move forward with major projects.
So if this all seems like déjà vu, you are right. We’ve been through this before… 33 times to be exact. As we start The Final Countdown to meet the July 31 deadline, we are likely to see a vote in the Senate this week and end up with yet another short-term patch – perhaps through the end of the year. In the words of Europe’s lead singer Joey Tempest, “And maybe we’ll come back to Earth. Who can tell?” Let’s just hope that when we come back to this point again at the end of the year, that the final product will be worth all the waiting.