In Wednesday night’s presidential debate, Hillary Clinton offered a brisk survey of how she would grow the economy. She promised jobs in advanced manufacturing and clean energy, help for small businesses, and more apprenticeships and technical education. She touted her work on debt-free college with Bernie Sanders. She vowed to raise the minimum wage, ensure equal pay for equal work, and make the wealthy and corporations pay their fair share.

But the first piece of this Clinton agenda was “the biggest jobs program since World War II,” part of a $275 billion program to rebuild the country’s infrastructure. Clinton’s campaign fact sheet says it will be paid for through unspecified “business tax reform.” If that means anything like what Senator Chuck Schumer has been talking about this week—and there’s good reason to believe that it does—this “reform” would involve a giant tax cut for corporations on their overseas profits.

This hasn’t been a big part of the election discussion. It’s not on billboards or yard signs. But if Democrats win the Senate, it’s likely to lead the agenda in 2017. I’d guess that nearly all 120 million Americans voting for president this year are unaware of this increasingly plausible outcome: Apple, Pfizer, and dozens of other multinationals exploiting a brazen scheme to evade their tax responsibilities.

Here’s the backstory: U.S. corporations have a 35 percent statutory tax rate, which they frequently lament as the largest in the industrialized world. (Of course, after the sea of deductions they take, the Government Accountability Office puts the effective corporate tax rate at just 12.6 percent, which is lower than most competitors). But there’s a catch: Corporate profits earned in other countries only get taxed when they are “repatriated” into the United States. If they stay overseas, the government cannot collect.

Over the years, corporations have learned that they can just stash cash overseas until Congress grants them a “tax holiday,” enabling them to return the profits at a much lower tax rate. While corporations claim this injects capital into the economy, federal studies have found that the most recent holiday, in 2004, did nothing to spur investment or job creation; in fact, the top 15 companies benefiting from the deal cut 20,000 U.S. jobs, and the money mostly leaked out to shareholders in dividends and buybacks. In a revealing interview last year, Bill Clinton noted that George W. Bush “felt personally burned” by CEOs who promised to put the repatriated cash into jobs and raises, then reneged.

In anticipation of Congress bailing them out again, corporations have hoarded $2.5 trillion overseas since 2004. Nearly two-thirds of the money is held by pharmaceutical and tech firms, who are adept at making it look like most of their profits are earned abroad.

What we have here, basically, is a monetary hostage situation. Corporations won’t bring back the money unless they get the same sweet deal as in the past: repatriation at a tiny tax rate. Congress has tried several times to work out a deal. Conservatives and centrists have attempted to bring around skeptical liberals by tying the tax receipts to infrastructure funding. While most of the repatriated earnings would be for the corporations to keep, even a 10 percent tax rate on $2.5 trillion in overseas profits would yield $250 billion for infrastructure.

But liberals hate a one-time tax holiday because it loses tax revenue over time— and not just because of the lower rates. Buoyed by a windfall, corporations will have every incentive to keep hoarding cash overseas and make even domestic profits look like they are foreign, further draining the tax base. Under Congressional budget scoring rules, you can’t “pay” for a federal program with a scheme that loses money.

The only way for the tax holiday-infrastructure swap to actually pass Congress is to give corporations a permanent tax cut on their overseas profits, turning the tax-holiday concept into more of a perpetual tax vacation. Then, as a “transition” to the new system, money that’s already been stashed abroad could get taxed and come home. That one-time boost to the Treasury could be used for infrastructure.

The lower permanent tax rate on overseas profits would be compulsory, so corporations couldn’t legally stash their cash anymore. That may be worthwhile, since it would defuse hostage-taking in the future. But regardless, it’s still a big corporate tax cut. Instead of having to try and evade taxes, Congress would give them the tools to minimize their obligations automatically. And Chuck Schumer, who’s in line to become the next Senate Majority Leader if Democrats take control, is at the forefront of this effortwith Clinton’s support, he claims.


Clinton has made the call for greater infrastructure spending a central part of her general-election message. But she’s never identified a specific revenue source. Now we may know at least one source she has in mind.

Speaking with CNBC’s John Harwood, Schumer highlighted two big things that he thought he could get done as Majority Leader under a President Clinton: “immigration reform,” and “some kind of international tax reform tied to a large infrastructure program.” He added that all the main stakeholders—Schumer, probable House Speaker Paul Ryan, and Clinton—agree on cutting corporate taxes on overseas profits, with transition revenue going toward infrastructure, possibly through an “infrastructure bank” that would combine that money with private dollars for various projects. When Harwood asked if the lower tax rate would have to be permanent, Schumer replied, “Yes, you can’t do a one-shot deal.”

Schumer has worked on this deal for over a year, in partnership with Republican Senator Rob Portman. They had support from President Obama, who proposed a more specific framework: a 19 percent permanent rate on overseas profits and a 14 percent transition tax. The plan might have passed last year, were it not for Mitch McConnell’s rejection. The Republican Majority Leader rolled the dice that he could get a better deal with a Republican president involved in 2017. (So much for that.)

Clinton’s corporate tax plan doesn’t mention repatriation, but Schumer seems pretty confident. And she has certainly indicated that she favors the scheme. According to a Wikileaks release of a 2014 transcript, Clinton touted the concept to an audience of insurance agents, saying “a number of business leaders have been talking to my husband and me about an idea that would allow the repatriation of the couple trillion dollars that are out there.” And in the first presidential debate, she followed Donald Trump’s endorsement of a tax holiday at 10 percent (his buddy, corporate raider Carl Icahn, has been promoting it for a while) by saying, “I happen to support that in a way that will actually work to our benefit.”

Critical to this whole project is the idea that there’s no other way to unlock the trillions of dollars sitting overseas—that we simply must give corporations a big tax cut in exchange for infrastructure funding. That’s not entirely true. The Treasury Department has initiated multiple steps to crack down on companies pushing funds overseas to evade taxes. Proper use of the antitrust laws would downsize the big companies best able to use this maneuver. And even if you agree that we should wipe the slate clean on a corporate tax policy that doesn’t work, why do corporations need to be gifted with a one-time transition tax of 14 percent or less? Why not tax them under current rules before transitioning? The companies would still get a gift, just not as big, and the money for infrastructure would more than double.

The entire concept is a form of corporate blackmail: “Give us our tax cut and nobody gets hurt, and you can fix a few roads.” But Washington has become so consumed with the idea of a “win-win” for businesses and jobs that most support it in some form. They forgot to tell the voters, however. People aren’t making phone calls and knocking on doors and traveling en masse to the polls this year so big corporate tax cuts can get negotiated. There’s no real constituency for what Elizabeth Warren has called “a giant wet kiss for the tax dodgers.” But maybe the tax dodgers are the only ones who matter.