Under current law, U.S. multinationals have little incentive to bring home the cash they hoard overseas, because they would have to pay 35 percent corporate income tax once they repatriate their foreign earnings.
Earlier this year, two senators proposed a repatriation tax holiday, which would enable companies to return money to the United States paying just 6.5 percent tax, not 35 percent. The bipartisan proposal suggests the proceeds could help finance the Highway Trust Fund, which is expected to run dry in May.
It would also limit the use of the repatriated funds, prohibiting their use for stock buybacks or executive compensation.
Although considered unlikely, it wouldn’t be the first time Congress passed a tax holiday for foreign earnings. In 2004, companies paid just 5.25 percent taxes on repatriated cash. However, a congressional subcommittee later found that the measure hadn’t been effective: many of the companies that profited most went on to cut jobs and reduce R&D spending in subsequent years.
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