In 2004, Congress passed the American Jobs Creation Act in an effort to boost the economy. One of the results of the act was the implementation of a repatriated tax break, which gave U.S. multinational corporations a one-time tax break on money earned in foreign countries.

The tax break allows foreign earnings to be taxed at a rate of 5.25%, which is significantly lower than the usual corporate tax rate of 35%. Previously, much of the earnings derived from foreign countries were not transferred back to the U.S. because multinationals can defer paying taxes on foreign earnings until they decide to send the earnings back in the form of a dividend.

Ultimately, the government's rationale is the tax break would incentivize American multinationals to use their foreign earnings to create more American jobs and/or expand operations in the U.S.

Critics of the idea believe because the companies aren't required to use the repatriated earnings for the sole purpose of American job creation (but the bill does prevent companies from using the money for executive compensation, dividends and stock investments), it is not assured the tax break will increase job creation. Furthermore, the tax break can be seen as a reward for companies deferring regular repatriation of foreign earnings and a punishment for companies that regularly send money back. Critics also worry the American Jobs Creation Act sets a bad precedent, as U.S. multinationals may see this tax break as an incentive to withhold future foreign earnings in the hope another repatriated tax break will occur.

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