President Donald Trump’s blueprint budget calls for a dramatic increase in defense and homeland security spending, offset by deep cuts to foreign aid and federal agencies like the Environmental Protection Agency. But could there be another way to build up the military without taking money away from other valuable programs? Americans for Tax Fairness (ATF) thinks so. “American multinational corporations owe $700 billion in U.S. taxes on profits they are holding offshore – much of it earned in the United States,” said ATF spokesman Ron Eckstein. “Before cutting spending on important services that affect people's lives, President Trump should make these giant corporate tax dodgers pay what they owe.” Tax deferral explained Multinational corporations, like their domestic counterparts, are taxed at the rate of 35 percent. If a company operating overseas pays taxes to a foreign government, these are deducted from its U.S. tax bill, which means that its effective tax rate may be much lower. Through a nearly century-old provision in the tax code known as “deferral,” the U.S. doesn’t tax multinationals on their overseas income until they “repatriate” the money back to their parent companies on U.S. soil. Deferral was originally intended as a way to encourage overseas investment and provide relief for U.S.-based multinational companies paying taxes to foreign governments. But it didn’t take long for multinationals to figure out that by setting up subsidiaries in overseas tax havens, they could avoid paying tax indefinitely by stashing profits in those subsidiaries – a process known as “inversion.” Today, U.S. multinationals hold more than $2.4 trillion offshore – that’s more than Trump’s $1.15 trillion budget – and currently owe the U.S. government about $700 billion in back taxes on all that money. The Institute on Taxation and Economic Policy (ITEP) released a report March 9 showing that 100 Fortune 500 corporations paid no federal income taxes at least once in the last eight years. Eighteen corporations, including General Electric, International Paper, Priceline.com and PG&E, even received tax refunds from the IRS on their combined profits from 2008 to 2015. ITEP says 48 corporations paid an effective tax rate of less than 10 percent over the same period. On average, large, profitable corporations in the United States paid an effective federal income tax rate of 21.2 percent over the eight-year period, significantly below the statutory 35 percent tax rate. “There’s a huge tax advantage to multinationals with deferral,” said Frank Clemente, executive director of Americans for Tax Fairness in an earlier interview. “Essentially, they get to use this money for free without paying any taxes on it—indefinitely. It makes them look more profitable; the more profitable they are, the higher the value of their stock.” And these companies apparently work hard to see that the loophole stays in place. According to Oxfam America, between 2008 and 2014, the top 50 U.S. multinationals spent about $2.7 billion on lobbying against any changes. How to bring funds back Over the years, lawmakers have floated a number of proposals for either ending deferral outright or encouraging corporations to bring their profits back home. In a 2004 experiment, Congress enacted a voluntary “tax holiday,” offering corporations that brought their profits home a highly-discounted tax rate of 5.25 percent—with one caveat: The repatriated funds should be spent on research, development and new jobs. More than 840 companies took advantage of the holiday, bringing back about $312 billion—that’s a tax break of about $100 billion collectively. But studies have since shown that most of the money wasn’t reinvested; it ended up in the pockets of executives and shareholders. Pharmaceutical giant Pfizer, for example, brought back $35.5 billion, but cut more than 11,000 jobs over the following two years. Hewlett-Packard repatriated $14.5 billion and, a year later, laid off more than 14,000 workers and purchased about $4 billion of its own stock. Worse, said Clemente, the holiday encouraged corporations to continue stashing profits offshore in the hopes of another tax holiday in the future. “That’s the irony of this whole thing,” he said. Between 2008 and 2013, U.S. multinationals nearly doubled their offshore holdings to more than $2.1 trillion. Even so, lawmakers have continued to consider repatriation holidays as a remedy to offshore tax avoidance. In 2014, Rep. John Delaney (D-MD) proposed a mandatory repatriation at an 8.75 percent tax rate. Sen. Rand Paul (R-KY) and his former Democratic counterpart Barbara Boxer proposed a 6.5 percent tax on funds voluntarily repatriated, to help encourage companies to bring money home. Trump position Trump’s 2015 tax plan called for ending deferral altogether: “Corporations will no longer be allowed to defer taxes on income earned abroad, but the foreign tax credit will remain in place because no company should face double taxation,” it read. Later, his language shifted, according to Scott Greenberg, an analyst at the Tax Foundation’s Center for Federal Tax Policy. “In fact, the latest version of his tax plan, released in September 2016, makes no mention of ending deferral, or any other changes to how income earned overseas will be taxed going forward,” he said. To try and keep companies from deferring offshore profits, Trump indicated he would lower the corporate income tax from 35 percent to 15 percent. He would also would enact a “deemed” (that is, compulsory) repatriation of foreign profits, which would be taxed at 10 percent. House Republicans, however, appear to have different ideas. In June 2016, they released a tax reform proposal that would move the U.S. from a “worldwide” tax system, meaning that companies pay taxes on both domestic and foreign earning, to a “territorial” system, by which they would only pay taxes on profits they earn at home. And they would lower the corporate tax rate to 20 percent. Ending deferral appeared not to be an option. Last week, Senators Bernie Sanders (I-Vt.) and Brian Schatz (D-Hawaii) introduced a bill to end the deferral loophole. “The truth is that we have a rigged tax code that has essentially legalized tax-dodging for large corporations,” Sanders said during a press conference. The Corporate Tax Dodging Prevention Act would tax all funds currently held offshore at the full corporate tax rate of 35 percent. Rep. Jan Schakowsky (D-Ill.) introduced a companion bill in the House. Trump had promised to make tax reform a priority during his first 100 days in office and in February said he hoped to release a plan sometime this month. But analysts say that between debates over Obamacare, the federal budget, Trump’s travel ban, and allegations of wiretapping by the previous administration, that tax plan will likely be many more months in coming.