A key part of President Trump’s tax plan is to repatriate corporate profits held overseas back to the U.S. With the lure of lower corporate rates, the idea is that companies will free up overseas earnings and instead invest in jobs and equipment in the U.S. A similar scheme was tried during the administration of George W. Bush, but companies used most of the money on stock buybacks or to pay dividends to shareholders.

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American companies have stashed an estimated $2.6 trillion in foreign profits overseas to avoid paying corporate taxes in the U.S. President Trump wants to cut the tax rate to encourage companies to bring that money here. He says it would boost investment and create jobs. As NPR’s John Ydstie reports, history suggests otherwise.

JOHN YDSTIE, BYLINE: It’s a pile of money worth more than the yearly economic output of countries like France and the United Kingdom. Under U.S. law, companies owe a 35 percent tax on those foreign profits, but they can defer the tax by holding the money overseas. President Trump’s tax overhaul proposal aims to get it back, as Treasury Secretary Mnuchin explained in late April.

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STEVEN MNUCHIN: We will have a one-time tax on overseas profits which will bring back trillions of dollars that are offshore to be invested here in the United States to purchase capital and to create jobs.

YDSTIE: During the campaign, President Trump said it would be a phenomenal thing.

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PRESIDENT DONALD TRUMP: By taxing it at 10 percent instead of 35 percent, all of this money will come roaring back into our country, and lots of good things will start to happen.

YDSTIE: But it turns out it’s not a new idea. Back in 2004, under President George W. Bush, Washington enacted a similar tax break that promised the same things.

C FRITZ FOLEY: It’s called the Homeland Investment Act. It was also referred to as the American Job Creation Act.

YDSTIE: Harvard Business School professor C. Fritz Foley says that law temporarily reduced the tax on foreign profits to just 5.25 percent. And it’s specified that the repatriated money be used only for investments in the United States. Five years later, Foley co-authored a report that found the so-called tax holiday did not result in new investments and new jobs.

FRITZ FOLEY: We found that the money that was repatriated was not associated with increased capital expenditures, increased employment or increased research and development.

YDSTIE: Instead, Foley says, the money was used to pay dividends to shareholders or buy back shares in companies. Foley says there was probably some economic benefit in that as shareholders reinvested their payouts or increased their consumption. So the tax holiday did not live up to its billing, Foley says, but it did provide one more sign that the U.S. corporate tax system needs to be fixed.

FRITZ FOLEY: We badly need tax reform, international tax reform here in the United States. Our system puts our companies at a disadvantage. And this holiday was a temporary relief from some of the distortions that our tax system imposes.

YDSTIE: Joseph Rosenberg of the Tax Policy Center says there is broad agreement that corporate tax policy needs an overhaul.

JOSEPH ROSENBERG: Unfortunately, that’s about where the agreement ends.

YDSTIE: In fact, Republicans and business groups are fighting among themselves right now over how to proceed. Foley and Rosenberg agree that a lower tax on profits currently stashed overseas would make sense as part of broader tax reform, but Rosenberg is concerned that broad reform might fail, and the temporary tax holiday might survive.

ROSENBERG: That would be unfortunate because it really does not address the fundamental problems of the corporate tax system and in some ways makes it much worse.

YDSTIE: Because if it did unfold that way, it would reinforce the notion among companies that it’s a good idea to build another hoard of cash overseas and just wait for the next tax holiday. John Ydstie, NPR News, Washington.

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