Imagine $2 trillion in untaxed corporate income. What politician could resist? Not Barack Obama. This week, as part of his latest budget proposal, he suggested both a one-time levy of 14% on the profit hoard American firms keep abroad, and a recurring tax on future foreign profits of 19%. These proposed taxes stem from one of the many peculiarities of America's tax code: unlike the vast majority of rich countries, America levies tax on firms' (and people's) income no matter where in the world it is earned. The corporate-tax rate, at 35%, is the highest among the 34 members of the oecd, a club of mostly rich countries. Currently, however, corporations pay tax on foreign earnings only when they repatriate them. No wonder, then, that the amount American firms stash abroad has been growing steadily for years (see chart), ge alone has more than $100 billion squirrelled away.
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