Tax writers in Congress thought they had the rest of the year to put together a new corporate-tax scheme for the country, but now they have a new deadline—July 31. If negotiators don’t come up with some kind of rudimentary agreement by then, it will be almost impossible to implement anything but a few routine extensions of popular tax breaks before the 2016 election.
Staffers from both the House and the Senate tax-writing committees said Monday that their panels haven’t given up on putting together a corporate-tax overhaul this year. The Finance Committee working groups are expected to submit their reports on possible areas of agreement on tax changes at the end of the month, and they will try to draft those possibilities into legislation in June and July.
But House GOP leaders last week punted at their first opportunity to move the tax-reform ball forward. Now, aides involved in the effort say, the overall task is harder.
If it doesn’t happen this year, tax reform in 2016 is virtually out of the question. There are too many presidential candidates in Congress who would be reluctant to vote on a tax package that directly impacts very few voters. Individual taxes aren’t expected to be part of the reform bill, lawmakers and analysts agree.
Meanwhile, Democrats are becoming louder in their protest over linking any tax-reform bill to a must-pass transportation bill. They argue that short-term extensions of Highway Trust Fund authority cannot continue with the carrot-and-stick lure of tax reform at the end of each postponement.
This week, Capitol Hill tax writers were supposed to have identified $8 to $10 billion in revenue raisers to allow the country’s highway and transit system to operate through the end of the year. That would have given them six months to figure out possible changes on the corporate-tax front. That forthcoming tax package, in theory, also was supposed to raise the requisite $89 billion for a five- or six-year highway bill that everybody wants.
But instead of proposing a stopgap bill for highways and transit through the end of the year, House Ways and Means Committee Chairman Paul Ryan and Transportation and Infrastructure Committee Chairman Bill Shuster offered a two-month extension. One House aide said that was all they could manage, given the pressure from a few key lawmakers who said they wanted to keep up the urgency for a bigger highway bill.
The House is slated to vote on the two-month highway extension this week. The bill is expected to pass without too much trouble, although Democrats already are making noise about this being the last stopgap they will tolerate. Rep. Earl Blumenauer, a Democrat from Oregon, wants to go as far as amending the bill to state that there won’t be another short-term highway extension.
Yet aides for the GOP tax writers said Monday that they want to pass another highway extension in July, this time with offsets. An aide for the Ways and Means Committee said it was still Ryan’s plan to extend highway authority through the end of the year and pass both a transportation and tax bill at that time.
Aaron Fobes, press secretary for Senate Finance Committee Chairman Orrin Hatch, said lawmakers had made progress on finding the offsets for a longer-term highway extension, but they needed more time to “work with our colleagues on both sides of the aisle.”
This means tax writers must pull double duty for the next few months. First, they must find both the monetary offsets and the political will for another partial-year highway extension by July 31. Then they have to figure out how they will fix the tax code within the few months they would buy if they manage to pull off the first step. Staffers indicated that the July 31 tax deal doesn’t have to be itemized down to the last section of U.S. code, but it does need to offer a workable path forward on agreed-upon tax items. And highways have to be taken care of no matter what.
Sen. Thomas Carper, a Democrat from Delaware, is working on a compromise measure that would give tax writers time to come up with a corporate tax bill while also ensuring a long-term highway bill, according to a Carper aide. He has been working with Democratic and Republican colleagues to assemble a long-term strategy for infrastructure that includes alternative funding ideas that would take effect only if tax reform doesn’t make it across the finish line, the aide said.
Details about those alternate payment mechanisms are still being worked out because Carper wants his compromise to be a bipartisan effort. Still, Carper and those he is negotiating with would prefer a “pro-growth business tax reform” bill that uses some of the revenues it raises for infrastructure.
Both Carper and Senate Environment and Public Works Committee ranking Democrat Barbara Boxer also have been clear that they don’t want to continue extending transportation authority without a long-term end game. They introduced a two-month highway extension last week, saying it was time for lawmakers to face up to the hard choices of keeping the Highway Trust Fund solvent, even if it costs money. They indicated that another short-term extension in July would be problematic.
EPW Committee Chairman James Inhofe also is in the camp of lawmakers who don’t want to continue the short highway extensions ad nauseam. He and Boxer plan to pass a long-term transportation bill in their committee in June, even the funding issue remains outstanding. “That’s somebody else’s problem,” Inhofe told National Journal recently when asked about the tax reform/funding conundrum. “My obsession is we’ve got to have the [highway] bill, and we’ve got to pass the bill.”