The Obama administration has proposed a balanced solution that fairly addresses the problems of overseas cash trapped abroad, good jobs and income leaving the United States and an unreasonably high current corporate federal income tax rate. The recommendations also take into consideration the goal that U.S. companies not to be put in an untenable competitive tax disadvantage with foreign rivals which are generally not taxed on income from sources outside their place of residence. 

The 2016 Obama budget contains a proposed adjusted 19 percent minimum tax on future foreign earnings of U.S. companies and a mandatory 14 percent tax for earnings currently held offshore. Revenue from the latter would be used to address infrastructure needs.  These proposals would be coupled with both an exclusion from U.S. taxation of substantial amounts of foreign earnings that were subject to a minimum level of foreign tax plus an overall drop of the federal income tax rate from 35 percent to 28 percent for non-manufacturers and 25 percent for manufacturers. This compares to a 35 percent top statutory rate for federal corporate income tax under current law.   

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There are currently in excess of $2 trillion of earnings held by U.S. multinationals outside the United States. There is both significant cash and accounting benefits for a U.S. company not to repatriate earnings of foreign subsidiaries. From a cash tax standpoint, under current law, generally unless something known as Subpart F applies, earnings of foreign subsidiaries of U.S. companies are not subject to federal income tax until if and when they are distributed to the U.S. parent company.

Furthermore, U.S. companies are not required to book a U.S. tax expense in their profit and loss statements under GAAP if the offshore earnings are considered to be permanently invested outside the United States. This is why it has been reported that General Electric had $110 billion of such earnings and that Microsoft, Pfizer, Merck, Apple, IBM and J&J had excess of $ 50 billion of offshore earnings. This so-called lock-out problem needs to be addressed.  

This is a much more equitable proposal than that of Sens. Rand PaulRand PaulTrump, GOP fumble chance to govern GOP senators pitch alternatives after House pulls ObamaCare repeal bill Rand Paul takes victory lap on GOP health bill MORE (R-Ky) and Barbara BoxerBarbara BoxerAnother day, another dollar for retirement advice rip-offs Carly Fiorina 'certainly looking at' Virginia Senate run Top Obama adviser signs with Hollywood talent agency: report MORE (D-Calif.) whose Invest in Transportation Act of 2015 would give corporations five years to voluntarily repatriate funds earned in 2015 or earlier at a 6.5 percent tax rate. There is certainly an argument that U.S. companies who in good faith followed the law in effect when they accumulated these overseas earnings should not face harsh retroactive tax treatment. By the same token, however, the proposed 14 percent corporate federal income tax rate contained in the Administration's budget is well below half the current normal statutory rate.  In contrast, the Paul-Boxer bill would almost replicate a provision in the American Jobs Creation Act of 2004 which permitted companies to voluntarily repatriate offshore earnings at a rate of 5.25 percent. It didn't serve to create many jobs, but it did result in exacerbating the nation's budget deficit. How can someone with an iota of intellectual honesty support such a provision and at the same time argue budget deficits matter? 

Sen. Orrin HatchOrrin HatchOvernight Finance: US preps cases linking North Korea to Fed heist | GOP chair says Dodd-Frank a 2017 priority | Chamber pushes lawmakers on Trump's trade pick | Labor nominee faces Senate US Chamber urges quick vote on USTR nominee Lighthizer Live coverage: Day three of Supreme Court nominee hearing MORE (R-Utah), the chairman of the Senate Finance Committee, has indicated that he is opposed to voluntary repatriation proposals like that of Paul and Boxer. He, however, has stated that the answer to inversion transactions, whereby U.S. companies become foreign without management moving offshore or major changes in shareholder ownership, is to adopt a territorial tax system whereby all or virtually all foreign earnings of U.S. companies, even if subject to little or no foreign tax, are never taxed by the U.S. That's analogous to proposing that violent bank robberies can be thwarted by leaving the bank door open and the vault unlocked. If foreign earnings of U.S. multinationals are never subject to U.S. tax even if earned in foreign tax havens, U.S. companies will think twice about building a plant or R&D facility in Salt Lake City when there is a major tax incentive to locate these operations in Singapore, Switzerland, Ireland etc. 

There are a number of well-heeled U.S. companies which enthusiastically support both a repatriation tax holiday like the ones proposed by Paul and Boxer as well as the adoption of a full territorial tax system. The primary obligation of senators and representatives, however, should be to the collective good of the American people.  If they follow this creed, they should be supportive of these Obama administration proposals.

Cohen is an associate professor of Taxation at Pace University Lubin School of Business and a retired vice president and general tax counsel at Unilever United States, Inc. The views in this op-ed do not necessarily represent those of any institution that he is or has been associated with.