U.S. corporations now have $2.6 trillion in untaxed earnings held overseas, according to a new estimate from Congress released Thursday, up from the $2.3 trillion last estimated in 2012.
The estimate, provided by the nonpartisan Joint Committee on Taxation, was requested by lawmakers who touted it as evidence of the need for international tax reform.
The estimate is “further proof that our broken, outdated tax code stands in the way of increased investment and job creation in America, and our global competitors are reaping the trillions of dollars in benefits,” said Rep. Kevin Brady, the chairman of the House Ways and Means Committee.
Under the current tax code, corporations are incentivized to keep foreign earnings outside the U.S. because they are allowed to defer taxation on those earnings until they do bring them back.
Many companies are delaying repatriating those earnings in the hopes of avoid the 35 percent rate at which the U.S. government taxes corporate profits, the highest among developed nations. Apple CEO Tim Cook, for example, has said that he won’t bring back the company’s profits without a “fair” rate in the U.S.
Republicans and the Obama administration have sought to lower the corporate tax rate. Some members of Congress also have tried to reach a deal on changing the way foreign profits are taxed to defuse the situation. That deal would set a special low rate to tax existing unrepatriated earnings, which would raise funds that some members of Congress have suggested could be used to pay for infrastructure projects.
Congressional Republicans have proposed reforming business taxation so that foreign profits no longer face taxes other than the corporate taxes in the countries in which they operate. Such a system is typical for developed nations, and many economists have blamed the fact that it is missing in the U.S. for the trend of U.S. companies seeking to move their headquarters overseas through “inversions.”
Republican presidential candidate Donald Trump has highlighted the amount of untaxed foreign earnings on the campaign trail, saying in Monday night’s debate with Hillary Clinton that a deal to bring back and tax the funds should be done immediately. He also raised the possibility that there is as much as $5 trillion in unrepatriated earnings.
The numbers released Thursday run counter to Trump’s suggestion. So does the estimate of unrepatriated foreign earnings calculated by the private-sector firm Audit Analytics, which found $2.4 trillion in earnings held abroad by checking the balance sheets of Russell 1000 companies.
