Senators John McCain, R-Ariz., and Kay Hagan, D-N.C., introduced legislation Thursday allowing multinational corporations to repatriate their foreign earnings at a reduced tax rate.

The bipartisan bill, known as the Foreign Earnings Reinvestment Act, aims to trigger the flow of $1 trillion from the foreign subsidiaries of U.S.-based multinationals at a reduced tax rate of 8.75 percent, as opposed to the statutory corporate income tax rate of up to 35 percent. It would accomplish this through a temporary dividends received reduction of 75 percent.

As an incentive to create jobs, the bill would allow companies to further lower the tax rate they pay to 5.25 percent if they grow their domestic payroll during 2012. In addition, the bill discourages companies from cutting jobs by including in a company’s gross income calculation $75,000 for each full-time position they eliminated.

“While Americans struggle with crushing unemployment and a dismal economy, Congress has the responsibility to come together with solutions to get our nation back on track,” McCain said in a statement. “I am proud to join Senator Hagan in introducing the Foreign Earnings Reinvestment Act. This common-sense legislation will drive up to $1.4 trillion currently parked overseas back here to the United States, boosting our economy when we need it most.”

A group of multinational corporations under the umbrella of the Win America campaign has been lobbying Washington for the tax break, arguing that it would bring investment and jobs back to the U.S. (see The Corporate Repatriation Tax Holiday Mirage). So far, the Obama administration has been cool to the idea, arguing that the last time such a tax holiday was tried, in the American Job Creation Act of 2004, most of the repatriated earnings went toward share buybacks for corporations and dividends for investors. More recently, the administration has argued the funds should go toward an infrastructure bank to produce jobs or be part of more comprehensive tax reforms.

However, the bill’s proponents argue that the repatriated foreign earnings would grow jobs at home. “The status quo is unacceptable,” said Hagan. “After months of anemic growth, one thing is clear—Washington-as-usual partisanship isn’t doing anything to help our economy rebound. Senator McCain and I are working across the aisle to pass the commonsense and bipartisan Foreign Earnings Reinvestment Act that would inject a trillion dollars into the American economy when it is needed most. Our stagnant economy demands practical, creative and bipartisan solutions right now.”

A similar bill was introduced in the House in May lowering the corporate income tax rate on repatriated earnings to 5.25 percent (see Congressional Bill Would Provide Tax Holiday on Corporate Profits Repatriation). One of the lead sponsors of that bill, Rep. Kevin Brady, R-Texas, said Thursday that he supported the Senate bill. “In this stagnant economy, allowing American businesses to bring back their profits from overseas to invest in jobs and expand their businesses in our backyard is just common sense,” he said in a statement. “Today’s bipartisan action by Senators McCain and Hagan is further evidence of the fact that we must explore all options that will allow our businesses to reinvest right now here at home. I hope that Congress can act quickly so that the President can sign repatriation legislation that will take effect this fall.”

However, two recently released studies from both left-leaning and conservative think tanks argued that the last time a repatriation tax holiday was tried, it failed to produce jobs.

The Institute for Policy Studies found in one study released Tuesday that many of the companies that benefited most from the tax holiday actually ended up laying off tens of thousands of workers in the U.S. within the first two years after the 2004 tax holiday occurred and nearly 600,000 workers in the years since. The 58 corporations that slashed those jobs accounted for nearly 70 percent of the total repatriated funds and collectively saved an estimated $64 billion from what they otherwise would have owed in taxes. Those 58 companies are collectively sitting on more than $450 billion in cash that could be invested in jobs, according to the report.

A separate study, released Monday by the Heritage Foundation, argued that the repatriation holiday would have little or no effect on investment and job creation, because the repatriating companies are not capital-constrained today, and any investment they would need in the U.S. could be financed by current and accumulated earnings, or through today’s historically low interest rates. “Adding to their financing abilities will not increase the opportunities for investment,” said the study.