(cnbc.com) Less than four months before federal government and state officials must confront another highway and mass transit funding crisis, two key individuals are pressing the cases for major tax reform to eliminate shortfalls in the Highway Trust Fund.
At a meeting with reporters last week, House Ways and Means Committee Chair Paul Ryan (R-WI) declared, "If we can get comprehensive tax reform, that can help fix it." The former Budget Committee chair and 2012 GOP vice presidential nominee has set a seven-month timetable for passage of comprehensive corporate and small business tax reform.
If crafted properly, Ryan said, reforms could help unlock many billions of dollars in revenues needed to prop up the Highway Trust Fund.
"There's no free lunch, I can say that," Ryan said. "What we're worried about or working on here at Ways and Means is how do we … address the shortfall [in transportation funding] that's coming at the end of May."
At the same time, Transportation Secretary Anthony Foxx said over the weekend that President Obama's proposal for a one-time 14 percent tax on nearly $2 trillion of foreign earnings is gaining traction among Democrats and some Republicans as a way to fund infrastructure projects. Major American companies are supposed to pay a 35 percent tax on overseas earnings, but many avoid that by using a legal loophole that allows them to keep the earnings in other countries indefinitely.
Under Obama's repatriation approach, companies such as Apple, Cisco Systems and Microsoft would have a one-time opportunity to pay taxes on overseas earnings at the much lower 14 percent tax rate. In addition, the proposal would impose a permanent 19-percent tax on foreign earnings.
The Obama proposal would raise an estimated $238 billion in the coming years to underwrite an ambitious infrastructure program, while an additional $240 billion would come from the current federal tax on gas and other revenue sources. In all, the six-year, $478 billion infrastructure proposal would provide a 33 percent funding increase for major public works projects.
In an appearance on C-SPAN that aired Sunday, Foxx touted the president's plan as a "pro-growth business tax reform" that has the virtue of reducing corporate tax rates for multi-national corporations with vast overseas holdings. While the proposal has drawn sharp fire in some quarters, Foxx argued it provided a good starting point for talks.
"Any time you have a pay-for for something as massive as transportation, there are going to be warts on any given proposal," he said. "We think this one meets the test of not raising tax rates, not raising deficits, but putting significant dollars into the system."
The federal Highway Trust Fund – the main revenue source for construction and repair of highways, bridges and mass transit projects – has been in crisis mode for years because of the inadequacy of its funding source. Most trust fund revenues come from an 18.4-cents per gallon gas tax that hasn't been raised since 1993.
Read more here: How tax reform could help save US infrastructure