The bill has bipartisan sponsorship from the influential U.S. Sen. Barbara Boxer, D-California, on the left, and U.S. Sen. John Ensign, R-Nevada, on the right. Supporters say the tax reduction will encourage corporations to expand operations and save jobs: economist Allen Sinai of Decision Economics is one who agrees.

Sinai argues the tax cut would serve as a private sector-funded stimulus plan and inject more than $545 billion into the U.S. economy without increasing the budget deficit, The Wall Street Journal reported. (Subscription required.)

Burdensome U.S. tax policy

Under current tax laws, U.S. corporations are charged 35 cents for every foreign dollar earned that they bring back to the United States. However, in many instances, foreign nations tax this income at a considerably lower rate, which encourages companies to keep that money outside the U.S. Economist Peter Dawson said a lower U.S. tax rate for repatriated earnings would bring money back to the U.S. the way pollen attracts honey bees.

"Assuming the tax cut is included in the tax bill, the Obama administration should lobby for it as the House and Senate stimulus bills go to conference committee. It has bipartisan support, Republicans will especially love it and it will save jobs," Dawson said. "Even if repatriation flows are lower than expected the measure can still inject hundreds of billions of dollars in investment capital into the U.S. It can serve as a 'mini' engine of growth."

Sinai's research suggests the tax cut would increase 2010 U.S. GDP by $110 billion, with a net increase of 614,000 jobs in 2011, The Journal reported (Subscription required).

Economic Analysis: The investor impact? Obviously, more investment and increased business activity: let's bring those dollars home! Jolted by stock market, home price, and investment losses (not to mention declining revenue, earnings, and dividends) the U.S. economy needs all the investment it can get. The nation needs this money for commercial operations and to encourage businesses to deploy new projects and/or invest in plant capital. At minimum, it will bolster cash positions -- no minor consideration in a recession. Congress must include the foreign earnings tax reduction as part of the 2009 fiscal stimulus package.