Here's the problem: Big businesses have tons of cash, yet most of it is parked abroad. Worse, they have every incentive to keep it there.                                             

Under the current tax code, profits earned abroad are first taxed at the foreign country's tax rate, then again at the U.S.'s tax rate if those profits are brought back stateside (minus an allowance for foreign taxes already paid). It's called the repatriation tax, and it's arguably the biggest reason companies have massive offshore cash hoards -- more than $1 trillion at last count. Since most foreign countries have lower statutory corporate tax rates than the U.S, the allowance for foreign taxes already paid doesn't cover the 35% repatriation tax, so the IRS comes a'knocking when foreign profits are brought home to America. Thus, they hoard them abroad.                    

And those hoards are growing fast. Bob Doll of BlackRock made an interesting prediction recently: Over the coming five years, 70% of earnings growth among S&P 500 companies will come from abroad. When most profit growth is abroad, and we give companies an incentive to keep those profits abroad, no one in America wins.

One solution is a repatriation holiday that lets companies bring foreign profits home at a one-time lowered repatriation tax rate of, say, 5%.

It's been done before. In 2004, a short-term repatriation holiday lured $300 billion from overseas corporate accounts back to the U.S -- about five times more than the previous year. Doing something similar today could be a huge injection to the U.S. economy. The 2009 stimulus package was a little under $800 billion of tax cuts and spending initiatives. A repatriation holiday today could harvest a hoard of cash equal to a good portion of that amount. And since most of this cash would likely stay abroad without a repatriation holiday, the impact on the Treasury's coffers is minimal.

But hold the phone, some say. The 2004 holiday wasn't all it was cracked up to be. So argued the Tax Policy Foundation this week:

A tax holiday on repatriated funds is a proven failure -- expensive in both direct and indirect ways. It was already tried in 2004 and didn't work ...

[F]irms are unlikely to invest the repatriated funds. Congress passed a similar repatriation tax holiday in 2004 and required firms to create domestic jobs or make new domestic investments to get the tax break. Nonetheless, the firms, on average, used the tax break to repurchase shares or pay dividends -- not to increase investment. 

The holiday, instead, turned into a massive tax break for shareholders -- resulting in little or no economic gain or job market expansion. Why? Because money is fungible, to satisfy the requirements of the law, corporations reported repatriated funds as the source of money for investments or jobs they would have created anyway -- and used other funds to increase shareholder wealth. 

They're right about one thing: The repatriation holiday wasn't a direct boon for jobs or investment. A Harvard study analyzing the 2004 holiday found that "a $1 increase in repatriations was associated with a $0.60-$0.92 increase in payouts to shareholders."

But calling that a failure sets up a false dichotomy. Yes, jobs are the most pressing issue our economy faces. But that doesn't mean every policy that doesn't create jobs has failed. If I'm seriously ill, overcoming that illness may be the top priority, but that doesn't mean getting a haircut is a failed idea. The problem with the 2004 holiday is that it was labeled a jobs plan, when those drafting the bill had to know otherwise. Companies that want to expand -- particularly large corporations -- can raise capital. Repatriating cash is almost always a shareholder-centric move.

The question that should be asked is: Is this money better off in a bank account in Geneva -- or New York? Even if all repatriated cash goes toward dividends and buybacks, it's still better than sitting idle overseas. And this isn't a move that would only benefit the wealthy. Roughly half of all American households own stocks, either directly or through mutual funds. Companies like Oracle (Nasdaq: ORCL), Microsoft (Nasdaq: MSFT), Intel (Nasdaq: INTC), and Cisco (NYSE: CSCO) all hold billions in cash offshore. All will, in all likelihood, keep most of that cash abroad as long as there's a repatriation tax. And all would, in all likelihood, increase dividends and buybacks if there were a tax holiday. How is that a failure again?

Some say we can't have a holiday because it gives companies the impression that there will be more in the future. And you know what? Good. We should ask why we have a repatriation tax at all. It's an anchor in a global marketplace. Many developed nations, including France, Japan, Canada, and Germany, use a territorial tax system, in which profits are only taxed where they are earned, not transferred to. Switching America to a similar system has bipartisan support -- backed by both the Republican chairman of the House Ways and Means Committee, as well as President Obama's deficit reduction committee.

What do you think should happen? Sound off below.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.