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Here's the skinny. If an American company earns profit in another country, it has to pay that country's income taxes. But if it then chooses to bring that cash back to America, it owes U.S. taxes, minus a credit for foreign taxes already paid. So imagine Cisco earns $1 billion profit in Switzerland. It will owe Switzerland's 8.5% corporate tax. But if Cisco then brings the remaining $915 million back to the U.S. to pay dividends or expand its workforce, it will owe another 26.5% to the IRS -- the difference between Switzerland's 8.5% tax rate and America's 35% rate. It's called the repatriation tax.

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U.S. companies held about $1.2 trillion in total cash. But almost 60% of that was sitting in foreign bank accounts, according to Moody's. Some companies hold the vast majority of their loot abroad. About 80% of Oracle's (NASDAQ: ORCL ) cash is held overseas. Apple (NASDAQ: AAPL ) holds close to 70% of its cash outside the U.S.

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The Joint Tax Committee estimates that ending the repatriation tax altogether would raise deficits by about $8 billion per year -- a rounding error measured against $2.9 trillion in total revenue. A separate estimate from the Congressional Budget Office shows that ending repatriation taxes would actually raise federal tax revenue, since companies would likely bring more cash home to pay dividends, which are then taxed. Either way, repatriation taxes have a trivial impact on the federal budget.

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Apple is waiting for a tax holiday as the bulk of its $137 billion in cash is overseas

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It's amazing how all of their sales activity that generates income occurs outside the United States, but all of their research and design activity that cause expense occur in the United States. Same for General Electric and all other multinational corporations. They basically avoid paying U.S. income taxes on any cash they do not need repatriated.

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It's amazing how all of their sales activity that generates income occurs outside the United States, but all of their research and design activity that cause expense occur in the United States. Same for General Electric and all other multinational corporations. They basically avoid paying U.S. income taxes on any cash they do not need repatriated.

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As Judge Learned Hand stated in Helvering v. Gregory, 69 F.2d 809, 810 (2nd Cir.1934) aff'd 293 U.S. 465, 55 S.Ct. 266, 79 L.Ed. 596 (1935): "Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes".

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"Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes".

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Even if you are correct about Switzerland's coporate tax rate, which Im too lazy to check right now. The point is, it's already been taxed, it shouldn't be taxed again.

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