Republicans put padlock on tax reform

House GOP tax writers are warning fellow lawmakers to stay away from their chairman’s broad tax reform proposal as they search for ways to pay for highway projects.

Lawmakers are scrambling for ideas to replenish the Highway Trust Fund, which could run out of money as early as August.

{mosads}Ways and Means Committee Chairman Dave Camp’s tax reform draft, released in February, sought to funnel $126.5 billion toward infrastructure investment through a tax on profits that U.S. multinationals have stored abroad.

But Camp (R-Mich.) and his allies have said that, even though tax reform isn’t going to happen this year, the chairman’s draft shouldn’t be viewed as a menu of options for policy initiatives on Capitol Hill.

“We want to maintain the integrity of the draft and our approach to tax reform. The last thing I want to do is see things get piecemeal,” Rep. Charles Boustany Jr. (R-La.) told reporters on Thursday. “I don’t think anybody on the committee wants to start tearing our draft apart and using it for pay-fors.”

Still, Boustany acknowledged that meant the Ways and Means panel, which is charged with finding ways to pay for whatever highway bill is crafted, was at a loss for the time being on how to fund infrastructure projects.

“Clearly, the trust fund’s running out of money,” Boustany said. “So, we have to come up with something.”

The Congressional Budget Office has projected that lawmakers will have to scrounge up an extra $100 billion to pay for a six-year transportation bill.

There’s been little appetite among lawmakers to raise the gas tax, which currently brings in about $34 billion a year for transportation projects.

Speaker John Boehner (R-Ohio) has also discarded his idea from 2011 to use revenue from oil drilling to pay for highway projects. President Obama’s four-year, $302 billion transportation proposal also relies on funds from a rewrite of the tax code, at a time when Democrats and Republicans remain far apart on tax policy.

With no easy choices, and Congress wading deeper into election mode, transportation observers have suggested that lawmakers will enact a short-term patch for the trust fund to push the issue past November’s election.

But even with that sort of breathing room, it’s doubtful that tax reform will be close to the finish line at the end of the year.

Still, GOP tax writers argue that lawmakers can’t simply pluck Camp’s highway proposal out of the tax reform draft.

The repatriation proposal, they argue, would be a critical part of any overhaul of the corporate tax system. Republicans have also long said Washington should overhaul the corporate and individual tax systems together, because many small businesses pay taxes as individuals.

“It’s a little more complicated than just pulling it out of the proposal,” Rep. Jim Gerlach (R-Pa.) said about Camp’s repatriation plan. “It’s a great idea. But I just think it’s really hard to do as a singular thing without more full-blown reform being attached to it.”

Camp has also pushed back against attempts to cherry pick his tax provisions to pay for other policy priorities, because losing any revenue makes the Herculean task of rewriting the code even harder.

With that in mind, the Ways and Means Committee chairman, who’s retiring at the end of his current term, is pushing to extend some temporary tax provisions for the long term, moves that would make the difficult math more manageable.

But that push is drawing opposition from Democrats, who call the extensions fiscally irresponsible. Rep. John Larson (D-Conn.), a committee member, said the GOP efforts to extend tax breaks like the research and development credit without offsets would make it even more difficult to find ways to fund transportation projects.

“Where are they going to get the money?” Larson asked.

Democrats have long pushed for infrastructure investments as a way to spark a sluggish economic recovery, and Larson pointed to proposals for infrastructure banks as a potential path forward.

“I think those make eminent sense. Why would they be opposed to something like that?” he said about Republicans.

The search for highway dollars underscores the real world impact that the logjam over tax reform is having.

Lawmakers complained this week about the drug company Pfizer’s attempts to take over AstraZeneca, its British counterpart. Such a move could slash Pfizer’s tax bill, since the United Kingdom has a vastly lower corporate rate than the U.S.

Still, tax writers said the only real solution to those moves was an revamped tax code.

“It comes 360 back to why we need to do comprehensive reform,” Gerlach said. “It takes leadership, and certainly Dave Camp has done his part.”