On April 29, 2014, the Obama administration delivered a four-year transportation proposal to Congress, with a massive price tag of $302 billion. Blatantly disregarding the Senate’s bipartisan efforts to “promot[e] fiscal responsibility” in the transportation bill, the president’s proposal calls for an approximately 38 percent annual spending increase over the current two-year transportation funding bill, known as MAP-21.
The Senate Finance Committee is scheduled to hold a hearing on Tuesday morning examining the funding and financing for the transportation bill. On Wednesday, the Senate Commerce Committee will hold a hearing on the administration’s transportation proposal, known as the “GROW AMERICA Act,” at which Transportation Secretary Anthony Foxx will testify. These hearings present an opportunity to ask how the administration plans to pay for another large spending bill.
The debate becomes even more critical as the current funding bill expires on October 1, 2014. Additionally, with the Highway Trust Fund set to go broke in late July or August, Congress must find a fiscally responsible way to reauthorize transportation funding. Unfortunately, President Obama has proposed to offset the costs of this proposal with $150 billion in tax hikes.
A Repeat Tax Proposal
The president’s proposal to pay for infrastructure spending with higher taxes on job creators is not a serious one. The proposal released last week by DOT was included as a placeholder in the president’s budget earlier this year. In that budget he also promised to pay for the transportation bill with $150 billion in business tax hikes. The president proposed this exact same swap of infrastructure spending for corporate tax increases last summer, and it landed with a thud. That proposal was based on a partisan corporate tax reform white paper the White House released in February 2012.
Growing Government: Tax Hikes Traded For Spending Hikes
The top corporate tax rate needs to come down. President Obama wants to be able to say that he is proposing to lower the corporate tax rate and thereby looking like a champion of limited government. But if his proposal went through, government spending would be higher, tax revenue would be higher, and the government would be bigger. Furthermore, reforming the corporate tax code without addressing the individual tax code would leave small businesses with a higher tax rate than large corporations, since many small businesses owners pay taxes through the individual code.
If the president wanted to have bipartisan agreement, he would not bring out this retread policy that has been rejected many times before. Bipartisan, revenue-neutral corporate tax reform could certainly pass Congress, just as a bipartisan transportation bill could pass Congress. By linking his transportation bill to his partisan tax proposal, the president is ensuring that this package cannot pass Congress.