James Inhofe is known for his belief that man-made climate change is not happening. Here’s something else he doesn’t think is happening — tax reform.
That doubt has profound implications for the upcoming fight over highway funding because other prominent Republicans are staking their hopes on tax reform as the savior of the highway and transit system. Inhofe doesn’t share their faith, and he doesn’t want infrastructure funding to be tied to corporate tax reform because he believes the chances of success are too slim to risk a highway-funding shortfall.
Inhofe’s opinions clash directly with House Republicans, who are laying out a plan to fund a long-term highway law with some type of tax-reform package. The details on this tax bill are vague, to say the least. Lawmakers with knowledge of the discussions can only say that it will be smaller than the massive overhaul proposed last year by former Ways and Means Committee Chairman Dave Camp (which went nowhere) and bigger than a one-time overseas tax holiday as proposed by the administration and some members of Congress.
Inhofe isn’t buying it, and his opinion matters. He chairs the Senate committee charged with setting highway and transit policy. While he clashes almost gleefully on environmental issues with his liberal counterpart, ranking member Barbara Boxer, the two leaders see eye to eye on infrastructure. Both Inhofe and Boxer believe a long-term funding bill for highways and transit should be passed this year. Both also believe that whatever stopgap measure is put in place this month should be short.
House Republicans see it differently. In order to buy time for their mini tax package to come together, they are now scrambling to find around $10 billion to fund a stopgap highway extension through the end of the year.
“We most certainly are still working toward some type of tax reform with the hope that it could provide a way to get highways done,” said an aide for the Ways and Means Committee, where the law is being written.
They have to act quickly. Current law expires May 31. If Congress does nothing, states will have to halt their summer road and rail construction projects, costing thousands of jobs and millions in investments.
The committee isn’t very far along, though. The Ways and Means aide said Republicans on the panel still haven’t decided how to offset even a few billion that would be needed for a short-term extension. Meanwhile, Democrats on the committee haven’t been briefed at all, other than receiving vague commitments that there will be a hearing at some undetermined time on transportation revenues.
“There’s talk that, ‘Well, there’s a rabbit to be pulled out of the hat.’ I’m willing to call the question,” said Rep. Earl Blumenauer, a Democrat from Oregon and senior committee member.
Watching from the Senate, Inhofe thinks the tax-reform negotiations are not yet ripe enough to bear fruit. He would like to settle the infrastructure matter another way, before the end of the summer. “Some people, for another reason, want to go longer so they can tie it to either tax reform or tax extenders. I don’t agree with that. I don’t want to do that,” Inhofe told National Journal.
An aide to Inhofe expanded on the senator’s thinking, saying he worries that any tax-reform effort will get bogged down in politics and lobbying—as has happened before—and that failure will take the highway bill down with it.
Inhofe isn’t alone in his opinion on taxes. He is expressing a skepticism widely circulated among tax analysts. They say that any meaningful reform package would be too complicated and packed with too many winners and losers to cleanly make it through Congress in a few months. If it has to raise money for highways, too, negotiators might as well throw in the towel now.
Inhofe is also one of the few Republicans who is willing to say outright that drivers should pay for their roads. He believes all options for funding a long-term transportation bill should be on the table, his aide said, including a “user fee” for drivers—Republican-speak for raising the federal gas tax. Senate Finance Committee Chairman Orrin Hatch made similar statements earlier in the year before backing off to say that such an option was politically unpalatable.
Last week, Senate Republicans huddled on the transportation issue, hashing out their options. There are two camps, according to lawmakers. On the one hand, lawmakers could cobble together enough spare change to get the highway law to continue into July, when they could then pass a longer-term bill. The only issue there is that they don’t have a way to finance it. And it’s $89 billion.
On the other hand, they could squeeze from the bottom of the general treasury’s toothpaste tube to extend the highway authority through the end of the year. They could then link the transportation measure to some type of corporate tax reform, an extension of popular tax breaks, or both. In theory, that would raise the needed $89 billion. But nobody knows exactly how.
“We’re in different places,” said Sen. John Thune, the No. 3 Republican in the Senate, after the meeting. “We’ll eventually come together behind a strategy.”
The House GOP, for the moment, is hunkered in on the idea of tax reform. “I want to see a tax reform. I think absolutely we need to do it,” said Rep. Bill Shuster, who is Inhofe’s counterpart in the House as chairman of the Transportation and Infrastructure Committee.
Shuster says the tax piece of the highway bill is in the hands of the tax writers, and he is waiting for the money the tax bill would generate for his own infrastructure measure. The tax writers have loftier goals, like lowering the corporate tax rate. “I want to get the dollars [for infrastructure], but I understand they have something bigger that they need to do,” Shuster said.
Republicans will need Democrats’ help to pass anything that raises money for transportation because ultraconservative House GOP members will likely object to the idea on principle. Blumenauer said Democrats are open to everything from a gas tax to a fair corporate-tax bill, but they aren’t going to sign off on something sight unseen. “I think Democrats on the committee would be supportive of something like a gas tax or something that’s big. I don’t see the groundswell for something that nobody’s seen or [makes] it more complex,” he said.