The sophomore congressman from Maryland isn’t given to pauses in his monologue, but this time he ponders for a second or two when asked how he came up with an idea to yank America out of transportation quicksand.
“I looked at all the factors a while ago and said, ‘This is where we’re going to go. People may not realize it, but they will,’ ” says Rep. John Delaney (D).
They realize it now.
Just as success has a thousand fathers, the concept of using almost $2 trillion in offshore corporate cash to bail out the beleaguered federal trust fund for roads, bridges and transit seems to have lots of parents on Capitol Hill these days.
“The number one source that is being talked about is this repatriation of funds,” House Transportation and Infrastructure Committee Chairman Bill Shuster (R-Pa.) told the U.S. Conference of Mayors in January.
A couple of years ago, however, when the then-freshman congressman from Potomac began pushing the concept, it took a while before bipartisan support — more than 40 members from each party — emerged.
“When we started talking about this two years ago, people were like, ‘What’s that idea?’ People viewed it as a real out-of-the-box idea,” Delaney says, “and now everyone’s talking about it. The president’s making references to it, Speaker [John] Boehner talked about it, and you hear that Rand Paul and Barbara Boxer are thinking about a bill.”
In fact, when Boxer and Paul announced their proposal, the unlikely marriage between the liberal California Democratic senator and the Libertarian-leaning Kentucky Republican senator drew attention as much for style as for content.
“There’s a tremendous amount of momentum in the Congress and the administration converging toward this idea,” Delaney says. “There’s a real natural deal to be done there between Democrats and Republicans.”
He figures it’s picking up steam because there is “a total absence of other ideas to deal with this problem, other than ‘let’s raise the gas tax.’ ”
“It’s a win-win for everyone,” he says. “When people started focusing on it, they saw it was good public policy, pairing best ideas from the progressive and the conservative movement, and that’s how you can do things on a bipartisan basis. People who care desperately about deficits and debt think this is a really good idea, people who care about infrastructure think this is a good idea and people who care about international competitiveness think this is a really good idea.”
Figuring out deals is nothing new for Delaney.
By the time he arrived in Congress, elected to represent a wildly gerrymandered district that squiggles through Montgomery County to cover all of Western Maryland, Delaney, 51, was thoroughly versed in the corporate world.
The son of a New Jersey union electrician, Delaney went on from Georgetown University’s law school to found two companies that were listed on the New York Stock Exchange. He’s ranked as one of the wealthiest people in Congress.
His first crack at a repatriation bill to fund transportation won support from almost 100 colleagues and a score of outside groups, but the congressional leadership ignored it last summer. Instead, they tapped into the general fund for an additional $10.8 billion and extended the current transportation bill until May.
“Leadership has the luxury of sitting back and, hopefully, having good ideas percolate up,” Delaney says. “When we came up with this idea, no one had really thought about it — it was a totally new idea. So I think it’s not unreasonable for leadership to say, ‘Let’s see if there’s any there there.’ We proved that there’s a lot of there there.”
Although there are significant differences between the Delaney and Senate proposals, the basic goal is the same. U.S.-based corporations have stashed close to $2 trillion in offshore accounts to escape the 35 percent U.S. corporate tax rate. If that rate is slashed — to 8.75 percent in Delaney’s bill or to 6.5 percent in the Boxer-Paul version — the belief is that that money might come flooding home.
They want to use that tax money to shore up the Highway Trust Fund, which relies on the federal gas tax to pay the federal share of transportation funding. Hemorrhaging in an era of fuel efficiency, the trust fund has been rescued several times with billions in general tax fund dollars.
With the current funding set to expire May 31, Congress has to consider its options fairly quickly. Few of them are as relatively pain free for the middle class that both parties hope to woo in 2016 as the Delaney-Boxer-Paul concept, commonly known as repatriation.
Raising the federal gas tax substantially is a non-starter for House Republicans and the White House. Rep. Paul Ryan (R-Wis.), chairman of the House Ways and Means Committee, has floated an idea to use royalties from oil and gas exploration on federal land to refuel the transportation trust fund.
There also is a push to shift more of the funding burden to state and local governments. About 20 states — including Maryland and Virginia in 2013 — have raised their state gas taxes or are considering doing so.
The White House and some heavy hitters on Capitol Hill, such as Sen. John Thune (R-S.D.), see the cash for transportation coming from corporate tax reforms, but dealing with the multiple tentacles of a major overhaul in time to meet the deadline — even if that deadline is extended — seems doubtful.
Delaney’s bill is the antithesis of simple, but nowhere so massive as revision of the tax code, and he says he thinks the repatriated tax money might arrive in time to meet the May deadline.
“I think so, or it could be a couple-of-month extension on the trust fund while things like this get debated,” he says.
The Boxer-Paul proposal came in for criticism the day it was announced last month, with the Center on Budget and Policy Priorities calling it a “tax holiday” that would cost the U.S. treasury $96 billion over the next 11 years. That’s in large part because companies that rushed to take advantage of it could duck higher taxes that they might have paid had they brought the cash home later.
The key word to know in understanding Delaney’s plan is “deferral.” In theory, the U.S.-based companies have deferred payment of taxes on their $2 trillion in cash overseas, a wink-and-a-nod suggestion that it all will come home some day.
Unless Congress moves on broader corporate tax reform, Delaney wants to end deferral.
His proposal would create a one-time tax rate of 8.75 percent on cash coming home — enough, he says, to provide an additional $120 billion for a six-year surface transportation bill. He says there would be cash left over for a $50 billion infrastructure fund that he thinks could leverage $750 billion through loans, bond guarantees and equity for state and local governments.
Delaney’s bill carries an 18-month deadline for international tax reform. If those reforms don’t come about, a provision in his bill would kick in to end deferral. Companies with their money stashed in tax-free havens would be subject to a 12.25 percent tax, even if they left it where it is. If the money is in countries where they pay a tax of 25 percent or more to foreign governments, they would face an additional 2 percent U.S. tax.
The bill, which Delaney calls the Infrastructure 2.0 Act, also would establish a bipartisan commission of the House and Senate to come up with a long-term fix for the depleted Highway Trust Fund.
“We clearly need to come up with a longtime fix. I have a view that the Congress is not ready between now and May to settle in on that fix,” he says. “You can’t fix it quickly, because the fixes are too painful and just not fair. If you have a good idea but you’re going to slam people with it right away, they’re less likely to do it. But if you have a good idea and you say we can do this really gradually, you can see people get behind it.”
The current crop of ideas — which Congress until recently has avoided addressing — includes a big hike in the federal gas tax of 18.4 cents per gallon, charging people for each mile they drive or shifting the tax-collection burden more heavily to the states. None is a popular option.
Delaney doesn’t expect Infrastructure 2.0 to be popular with everyone, either.
“I used to say in business that the best business deals are ones in which everyone feels a little bad when they’re done,” he says. “There’s no question that there’s something in our bill that everyone can feel a little bad about, but in general, I think it’s a bill that satisfies what each party really cares about.”