January 15, 2015
On behalf of Americans for Tax Reform (ATR) and millions of taxpayers nationwide, I urge you to oppose any increases to federal gasoline taxes. Before even considering asking drivers to increase the $35 billion they annually pay in gas taxes, Congress should ensure that Highway Trust Fund (HTF) outlays are actually spent on roads and are not diminished through Davis-Bacon wage requirements. If these reforms are implemented and the federal government still needs more money to build and repair roads, bridges, and highways, I urge you to consider dedicating repatriation revenue to the HTF.
Since 2008, the HTF has spent $55 billion more than it garnered from gas taxes. The HTF is supposed to be a user fee where drivers’ gas taxes fund the HTF and that money is reinvested in bridges and roads. In reality, billions of gas tax dollars are syphoned off to fund mass transit projects in major cities, bike paths, and things like squirrel sanctuaries.
Additionally, Davis-Bacon wage requirements reduce the federal government’s bang for its buck. According to the Davis-Bacon Act, federal construction contracts worth more than $2,000 must pay wages using data collected by the Wage and Hour Division at the Department of Labor. The Joint Economic Committee found that wages paid under Davis-Bacon rules were 22 percent above market wages. This makes sense since an inspector general report found errors in 100 percent of wage reports examined. It also reduces the number of roads and highways the government can build and repair.
After these reforms have been implemented and if the HTF is still in need of more revenue, Congress should allow American companies to bring back, and pay a reduced tax rate on, capital currently stuck abroad.
There is likely well over $1 trillion in after-tax earnings sitting overseas today. Companies don’t bring this money back to the U.S. because they would have to pay taxes on the difference between the U.S. corporate income tax rate (over 39 percent when states are included), and whatever rate they already paid overseas (the OECD average is just under 25 percent). Repatriated earnings from an average developed country thus faces a 14 percent surtax when brought home to the United States.
Allowing companies to bring back this money at a reduced, reasonable rate would be a huge boon to the American economy and could bolster the HTF. In 2005, companies were allowed to bring after-tax overseas earnings back to the United States and face an IRS double-tax no higher than 5.25 percent. With this positive incentive, about $320 billion was brought back, resulting in a pro-growth cash windfall to the Treasury of about $17 billion. This money could be earmarked to the HTF. This is an example of raising revenue without raising taxes, unlike a gas tax hike.
The U.S. Energy Information Administration has said that average U.S. households will save about $550 on gasoline costs this year. Washington should not be looking to raid this reprieve in gas prices but should ensure that gas tax revenue is spent on roads and that American companies are allowed to bring back earnings abroad.