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House and Senate spar over tying repatriation to highway spending

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Republican tax writers in the House and Senate deepened a divide last week over whether to use international tax reform and a tax on unrepatriated foreign earnings to help cover a highway funding shortfall.

Senate Finance Committee Chair Orrin Hatch, R-Utah, last week dismissed efforts to pay for highway spending with international reform that would include a mandatory repatriation proposal. Highway funding is set to expire at the end of July, and Hatch is working on funding an extension of 18 months to two years. Such an extension would require approximately $30 billion to $40 billion to cover a funding shortfall. He has called a six-year bill, which would require $100 billion, “wishful thinking.”

House tax writers meanwhile continue to focus on using a tax on unrepatriated earnings to pay for a six-year bill. House Majority Leader Kevin McCarthy, R-Calif., has offered vocal support, and House Ways and Means Chair Paul Ryan, R-Wis., has expressed interest in the proposal. Business groups, however, remain split on the proposal.

Republicans on the Ways and Means Subcommittee on Select Revenue Measures recently held a hearing exploring the possibility but acknowledged some of the challenges. Members noted that a voluntary repatriation with a reduced rate for returning earnings to the United States is a revenue loser. A mandatory tax on unrepatriated earnings raises revenue, but Republicans acknowledged that this provision works only as part of a broader international reform effort transitioning to a territorial tax system. Even then, subcommittee Chair David Reichert, R-Wash., noted that using some of the repatriation revenue on highway spending instead of tax reform would be a tax increase.

Tying international reform to highway spending remains an uphill battle, but the idea still appeals to Ryan, who has recently shifted focus from business reform to international reform.

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