The Senate was expected today to vote for a three-month extension of surface transportation programs that the House approved on Wednesday, after also approving by a vote of 65-34 the six-year bill the Senate had hoped to pass this week. The six-year bill now awaits action in the House before an October 29 deadline.
There will be the usual hand-wringing about Congress being unable to pass relatively uncontroversial bring-home-the-bacon legislation, but this time short-term congressional paralysis offers the chance to prevent a long-term disaster.
The six-year bill that the Senate considered is actually only funded for three years, and then only with the help of a cobbled-together series of marginal revenue raisers to complement dwindling revenues from the federal gasoline tax dedicated to roads, bridges and public transit.
Some of the proposed revenue-raisers were truly awful, such as a plan to take money out of the Social Security trust fund that would otherwise have been paid to people with outstanding arrest warrants. Once word got out about that proposal, Senate Democrats were able to band together and get that scuttled.
Not in that bill, but lurking very much in the background, were proposals – touted no less by the likely future Senate Democratic leader and the ranking Democrat on the Senate Environment and Public Works Committee – to raise surface transportation money through a plan that would ultimately reward corporate tax evaders.
The idea would have been to offer multinational corporations a reduced tax rate for profits held in overseas subsidiaries or brought back into the United States from those subsidiaries. Instead of the 35 percent top corporate tax rate, corporations would pay far less than half that rate – in some versions of the idea, less than a third of that rate.
These plans to gain some revenue from profits repatriated from foreign subsidiaries were gaining dangerous momentum from even progressive Democrats, especially after Sen. Charles Schumer (D-N.Y.) signed onto a comprehensive corporate tax reform proposal containing the repatriation tax discount with Sen. Rob Portman (R-Ohio). The Schumer-Portman plan includes a “deemed repatriation” proposal that sets what it calls “a one-time transition toll charge at a rate significantly lower than the statutory corporate rate.”
Put simply, multinationals that game the tax code to shield their profits from taxes by funneling sales and other transactions through overseas subsidiaries in low- or no-tax havens would receive substantial forgiveness for their evasion. And that forgiveness would be the basis for a permanent rigging of the rules that would encourage multinationals to keep the evasion scheme going.
The buy-off for the rest of the faithful taxpaying public would be that these multinationals could claim that they are paying a small amount toward the roads and public transportation they use to move their goods and workers, which is why some usual progressive allies in both houses shrug and conclude it’s better than the nothing at all we’re getting now. But make not mistake; it’s a fundamentally dishonest deal.
By Congress putting off action on authorizing a long-term transportation bill, the progressive movement gets three months to break the momentum of this corporate tax giveaway and move Congress toward a more honest way of funding the transportation investments we need.
First, corporations should not be allowed to lock in the ill-gotten gains of their gamesmanship and lobbying muscle on the tax code. Fifty years ago, corporations were responsible for about a third of the nation’s total tax bill and working people paid the rest. Today, working people are shouldering 90 percent of the total tax bill even as their wages have stagnated or fallen in the past decade. Corporations, on the other hand, are earning record profits but are only paying 10 percent of the total tax bill. Corporate lobbies are spending millions to make that share even lower. It needs to be significantly higher. We need to build pressure on Congress to increase what corporations pay, and reject “revenue-neutral” corporate tax reform that locks in tax unfairness for decades to come.
Second, we need a more ambitious long-term bill than what the Senate passed. The Senate bill would authorize $350 billion in spending over six years for roads, bridges and public transportation. That is less than what would have been authorized by a bill House Republicans introduced for federal transportation programs 11 years ago. More to the point, the Senate bill would cover only about 20 percent of what the American Society of Civil Engineers says it would cost – more than $1.7 trillion – to bring our surface transportation network to a “state of good repair.” In that context, Vermont Sen. Bernie Sanders’ proposal for a $1 trillion federal infrastructure program makes far more sense, but has gotten far less attention.
Options that have been taken off the table by the irrational aversion of Republicans, and too many Democrats, to raise a tax, no matter how strong the case for raising that tax, must be put back on the table. That includes an increase in the gasoline tax – which would gain acceptance once explained to the public as a bargain for better-maintained roads and transit and more good jobs.
Watch in the coming weeks for a grassroots campaign to push Congress toward doing this right: Fund a bold, job-producing surface transportation plan, paid for with honest revenues, including from corporations and the wealthy paying their fair share. And don’t continue down the road of rewarding and encouraging corporate tax evaders and job outsourcers, but make corporate tax reform a progressive reform that is fair to working people.
This post has been updated to include the Senate vote on a six-year transportation bill. An earlier version incorrectly stated that the six-year Senate bill would not come up for a vote.