In a recent interview, former President Clinton proposed giving multinational corporations, which have socked away more than $2 trillion in profits in overseas tax havens, a huge tax break to bring these funds back to the U.S. His suggestion? Give companies a tax holiday when they bring those profits home, but require them to use 10 percent of the funds they repatriate to seed a new infrastructure bank by buying tax-exempt infrastructure bonds. It's a deal that the multinationals are likely to welcome. But America doesn't need another tax cut that rewards the 1 percent at the expense of those who actually pay their taxes. Plus, the Clinton proposal seriously misunderstands where those profits are now.

Multinationals — especially IT companies like Apple and Google and pharmaceutical companies like Pfizer — set up subsidiary companies that live in file cabinets in lawyers' offices in the Cayman Islands and other low- or no-tax localities. The multinationals credit the royalties they receive for their copyrights or patents to these subsidiaries, avoiding paying U.S. taxes on the considerable profits these royalties generate. The subsidiary may live in a file cabinet drawer and the companies may choose not to repatriate their profits to the U.S., but that doesn't mean that the funds are locked in the cabinet drawer. No, the subsidiary uses these funds to buy U.S. Treasury bonds. Most of these un-repatriated profits are already being put to work in the U.S. One recent analysis of Securities and Exchange Commission filings found that Apple, Microsoft, Google and Cisco own $163 billion of U.S. government securities.

This raises interesting possibilities. For instance, if Congress wants to seed an infrastructure bank to shore up the country's failing roads, bridges, electric grid, water supply, public schools and so on, it simply has to direct the new infrastructure bank to issue $302 billion in bonds (the amount President Obama has requested for infrastructure investment in his 2015 federal budget proposal) and pay a small premium over the interest rate on Treasury bonds. This would attract funds for infrastructure investment from cash-rich corporations, domestic as well as multinational, without rewarding those companies that have parked their profits offshore to avoid paying their fair share of taxes. The Joint Committee on Taxation has shown that multinationals are saving billions of dollars in unpaid taxes.

The Clinton tax holiday deal for multinationals also leaves untouched other economic distortions created by letting U.S. companies park profits offshore to avoid paying taxes. Pfizer's failed $118 billion bid for British pharmaceutical company AstraZeneca was motivated in large part by the opportunity it provided for deploying Pfizer's multi-billion dollar hoard of offshore profits. Pfizer planned to pay for a big part of the cash piece of this deal out of the $30 billion in profits it holds outside the United States. Pfizer offered to locate the headquarters of the combined company in the United Kingdom, which would have guaranteed that Pfizer would never have to pay U.S. taxes on these profits.

Moreover, Pfizer provided assurances to British regulators that R&D and jobs would be retained in the United Kingdom. Cutbacks related to synergies realized in the merger would presumably fall on Pfizer's U.S. workforce and R&D spending.

As AstraZeneca argued in successfully opposing the takeover, megadeals need to have a lot more going for them than immediate tax savings in order to succeed. There may be good reasons for a merger, but tax benefits are not one of them.

There is a better, simpler and more elegant solution than the Clinton proposal.

Corporations that sell goods and services in the U.S. should be taxed on that portion of their earnings that are generated in the U.S. The IRS already keeps track of where the operations of American companies are located and where they earn their profits. It would not be difficult to determine what share of a company's total sales occurs in the United States. This percentage could then be used to calculate the share of a company's total profits that are taxable in the U.S.: The percentage of a company's global profits represented by its U.S. sales would be subject to U.S. taxes.

California has already put a similar tax rule in place. Congress would do well to follow suit.

Appelbaum is a senior economist with the Center for Economic and Policy Research and co-author, with Rosemary Batt, of the book Private Equity at Work: When Wall Street Manages Main Street.