James Inhofe, Tax-Reform Skeptic

Key Republicans want to use a tax-code overhaul to pay for a highway bill, but Inhofe has his doubts.

Senate Armed Service Committee ranking member Sen. James Inhofe (R-OK) talks with reporters.
National Journal
Fawn Johnson
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Fawn Johnson
May 4, 2015, 4:05 p.m.

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.

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