Congress is likely to enact a short-term patch while it debates whether now is the time to take on a full six-year reauthorization of a transportation program that funds road and bridge projects across the country.
Either way, Hatch’s committee will be on the hook for figuring out how to pay the bill.
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The White House wants Congress to pay for the long-term highway bill by overhauling parts of the business tax code. Hatch (R-Utah) and House Ways and Means Committee Chairman Paul Ryan (R-Wisc.) have said that while they are open to working with President Obama on re-writing the tax rules for businesses, neither wants to sign off on a plan to earmark the money it raises for a highway bill.
What do they want to do instead to cover the cost of new infrastructure projects? So far the two powerful chairman aren’t saying.
Some Republicans would like to enact a six-month extension of the trust fund and deal with the issue at the end of the year, but Senate Democrats may block that plan in an attempt to make the GOP’s lack of a clear infrastructure funding plan a political issue.
Hatch has plenty on his plate other than the highway bill.
Elected in 1976, he is the longest serving Republican in the Senate and his rise to the top of the Finance Committee this year puts him in the powerful position of overseeing tax, trade and Medicare and Medicaid policies.
He recently sat down with The Washington Post to discuss his role as chairman, why he thinks President Obama isn’t serious about tax reform and why he won’t name names when it comes to which Democrats he works with best. What follows is a transcript of that interview edited for length.
The White House would like to use revenue from international tax reform to help pay for the Highway Trust Fund. Is that something that you would consider?
No, we need to fix the highway process so that it’s done with monies that we get from programs that aren’t really that effective and should not be in existence. The fact is we are working very hard trying to get a multi-year highway bill through. The Democrats are trying to make a big political fiasco about that because they want to increase the gas tax.
We’ve been severely warned that that’s not going to fly over in the House and for good reason they’ll just get the money in and they’ll just blow it up like they always do and we don’t solve the problem we need to solve.
Would you support a short-term patch to the highway bill through December in order to work on a larger deal with taxes and other issues?
I’ve always said I thought we should have done it until December to give us more time to do this. On the other hand they’re playing politics with it and they’re talking about extending it month to month so they can beat up Republicans for not raising taxes.
What’s the benefit of moving the deadline to December?
It gives us more time to make all of the decisions and all of the maneuvering to raise the funds. They are arguing that we’re not moving ahead with highway monies, we are moving ahead very, very hard and they are making it more and more difficult to get it done.
There’s not a lot of cooperation unless you want to raise taxes again.
We have to find another way of doing this. They understand this so they’re going to try to score cheap political points like they are.
Ultimately I’d like to find a permanent solution to it but it’s going to take a lot of effort and work to do that and we’re not going to get it done between now and the end of the year.
Is this the year when we can do tax reform or have we reached a point where the answer is no?
Let me put it this way, it took three years to do the ‘86 bill and they had a much less comprehensive tax code than we have now. We think we can do it in a shorter period but it is going to take tremendous presidential leadership and I’m not sure that this president is that involved. He wants to do business tax reform first, Congressman Ryan and I have said if you’ll submit a detailed and well thought out plan we’ll see what we can do. We’ve said that for the last several months and we haven’t seen anything.
Plus business tax reform isn’t as easy as people think. They think it is a small part of the tax code but it’s a big part of the tax code. There are different needs and desires between small businesses, pass through businesses and C-Corporations. So it’s not a simple thing. I’m going to work on it but they should at least submit what they would like.
Sen. Schumer frames the conversation about business tax reform around international taxes. It seems like you are at different places, the White House is talking about business reform, Republicans in Congress are talking about comprehensive reform and you have others like Schumer talking about international.
I’ve talked about international in the past myself but they’re talking about it as way of raising taxes. They’re looking at it as a way to get extra money to spend. Frankly, that should not be used for that purpose. There is no question that we need to go to a territorial system versus our worldwide system. Our country is losing badly because there is over $2 trillion overseas that they’re not going to bring back at a 35 percent corporate income tax rate. It is just that simple.
If we could bring that money back with a reasonable system, and the president’s plan is not a reasonable system — he wants a 19 percent [tax rate on future earnings] and then a 14 percent [tax on all existing assets currently held offshore] that’s just way too high. Businesses aren’t going to bring it back at that rate.
Do you have another rate in mind?
No, last time we did it was about 5.25 percent and I don’t think that’s good tax policy. If we bring that back it ought to be used to help get the economy moving again by, if anything, getting spending under control.
Is 5.25 percent a more reasonable target?
I don’t think we should do that either. I think we should move to a territorial system where if they are taxed overseas they don’t get taxed here.
Let’s just be honest about it. It is very easy today with the [Information Technology] world to move labor and money overseas. It is a snap. That’s why we have some of these inversions because why pay 35 percent corporate tax rate here when they can pay 12 percent in Ireland or 21 percent in England or a lower percentage in most of the rest of the world.
On inversions, why do you think the Treasury Department is holding off on any additional regulations they had discussed to crack down on inversions?
They know that to really solve the inversion problem we’re going to have to do a business tax bill.
I had a top CEO call me and he said we can take our company over to England and we can transfer all of the parts that you would tax and do it at 21 percent rather than 35 percent and keep our headquarters here. Then what happens is they can borrow here and not pay any taxes here and have tax deductibility here.
I can’t blame corporate leadership for doing something like that in the best interest of their shareholders. Their job is to protect their shareholders.
Who are the Democrats that you think are your partners on tax reform?
I wouldn’t want to mention any names… It’s too sensitive for them. They know that Republicans, if we do tax reform we’re going to reduce taxes if we can and they keep themselves in power by taxing, spending the taxpayer money and claiming they are compassionate with the taxpayer money. It is a scam but it has been done now ever since FDR.
As far as I can see, aside from the ‘86 work, we have as good a chance to have a bipartisan bill, at least I think so. I think there are a number of Democrats who would work with us just to do this for the country. The problem is that when you have presidential leadership it is a lot easier.
I go back to the Trade Promotion Authority bill. The president didn’t weigh in for the early part of that. The trade ambassador did but I’m talking about the top guy. Finally near the end we had a big chat and he asked me to do more for Sen. Wyden. I said: “I’ll do it, I’ll see what I can do” but I said “you’re going to have to get involved. You’re going to have to bring these guys down to the White House and talk to them. It’s the Democrats that are making it tough to pass.” To his credit he really, really started to work it.
He started bringing them down, he started making phone calls. He really started to work like one who wants a victory should. I really respect him for that but on tax reform we haven’t seen it.
Were you surprised that small businesses refused to send suggestions after you and Chairman Ryan sent a letter for asking input on how to manage the issue of pass-through companies in tax reform?
Chairman Ryan and I were simply asking the small business community to weigh in and we are happy to hear their concerns. We want to hear them. We want everyone to weigh in as much as they can. The more we can hear those concerns now the easier it is going to be get this through in the future.
Without proper treatment of pass-through entities I think there is going to be little appetite for business-only tax reform. So it’s just a matter of reality. We’re naturally trying to find ways to resolve that problem if we have to go the business tax reform we’re not ignoring the president and we’re not ignoring what he asked for but he has asked for things that he hasn’t shown us what he wants
We are happy for him to tell us how he wants to heal this process.