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Economics

To Tax, or Not to Tax, Overseas Cash Hoards

Supporters cheer as Republican presidential candidate Mitt Romney delivers remarks on the James Koch Farm in Van Meter, Iowa
Supporters cheer as Republican presidential candidate Mitt Romney delivers remarks on the James Koch Farm in Van Meter, IowaPhotograph by Jim Watson/AFP/Getty Images

Updated with the time frame in which $187 billion in foreign income accumulated abroad, and to clarify where and when administration officials suggested a possible minimum tax rate paid to foreign countries that would exempt companies from having to pay U.S. tax.

One little-mentioned topic in the debate over how to solve the nation’s $16 trillion debt crisis is overseas profits and how companies are taxed on them. Because the current tax code allows corporations to defer taxes on foreign income—which Bloomberg estimates grew by $187 billion in 2011—many opt to keep it overseas indefinitely rather than pay the IRS, at a rate of 35 percent, to repatriate the money. Kimberly Clausing, an economics professor at Reed College, says the U.S. Treasury lost $90 billion (PDF) in 2008 due to multinationals legally avoiding tax payments by leaving money overseas.