Republican Senator Rob Portman and Democratic Senator Charles Schumer both support using a transition tax to fund transportation infrastructure including it as a proposed measure in the final report they submitted to the Senate Finance Committee.
“Although we need comprehensive reform, our report clearly demonstrates the urgency of addressing the international tax system, and how the right kind of international tax reform can be a step in the right direction for more comprehensive reform,” Portman, who along with Schumer co-chairs the working group on international tax reform, said in a statement.
The report, which addresses issues such as base erosion and inversions/foreign acquisitions, is meant to provide guidelines and recommendations to the Senate Finance Committee as it works towards formulating a plan for comprehensive tax reform.
Regarding transportation infrastructure specifically, Portman and Schumer stated in the report that they “have agreed to the framework contemplated by Chairman [Dave] Camp and President [Barack] Obama.”
As Chairman of the US House Ways and Means Committee, Camp had introduced the Tax Reform Act of 2014 last December, right before leaving office. According to the proposed bill, a ‘toll tax’ or transition tax would apply to foreign subsidiaries’ post-1986 historical earnings and profits not previously subject to US federal income tax. The ‘toll tax’ proceeds would then be allocated to the Highway Trust Fund to fund surface transportation programmes.
President Obama included a similar measure in his draft 2016 budget proposal that would impose a 14 percent one-time tax on previously untaxed foreign income, the proceeds of which would go towards a long-term surface transportation reauthorisation.
“The bipartisan international tax reform framework released today by Senator Schumer and me shows that our system of international taxation is woefully out-of-date,” Portman said in the statement. “It has been 50 years since the US has substantially updated its international tax laws, and by standing still, the US has fallen behind,” he commented, adding that the report is not the end but the beginning of a process.
The working group will continue to work with the staff of the Joint Committee on Taxation on the specifics of an international tax reform proposal, the two senators wrote in the report’s foreword.