A Republican congressman who sits on the House Ways and Means Committee is proposing a tax rate cut for foreign earned income which could bring more than $135 billion held by US companies overseas back onshore, according to one Texas newspaper.

As Congress debates a scaled-down version of President Bush's economic growth package, Rep. Kevin Brady has filed a provision to reduce the 35 percent corporate tax on foreign-earned income to 5.25 percent.

Estimates suggest that US companies would be encouraged to bring home about $135 billion in profits they're now holding in offshore jurisdictions such as Bermuda to avoid US corporation tax.

According to the Houston Chronicle, the proposal has bipartisan support in Congress. More than four dozen major US corporations with significant overseas operations also back it. If Congress goes along, the companies say they will flood the economy with foreign-earned profits now held offshore.

But the newspaper said critics say Congress' enthusiasm for the measure is troubling because the tax cut would amount to an unwarranted gift to industries, setting a dangerous precedent.

The Houston Chronicle article also questioned whether companies who have foreign subsidiaries to avoid paying the high corporate income tax would bother to change their investment strategy for just one year.

However corporations backing the measure say the move would be a needed boost for the cash-strapped technology industry.

The White House has not backed the proposal, but is focusing on the president's dividend cutting growth package.

Leaders of both chambers are to meet with Bush today, when they are expected to iron out differences in their proposals. The House is backing a $550 billion provision while the Senate is considering a significantly smaller $350 billion package. Bush initially sought a $726 billion draft.

Senators say some of the Bush plan may be restored, but only if Congress can find ways to save money elsewhere.

Among the proposals being floated is retroactive elimination of so-called tax havens.

If this is passed, Bermuda-based companies such as Cooper Industries and Nabors Industries who changed their corporate headquarters to Bermuda in the last year will be hit with a large tax bill which would be retroactive to March, 2002.

Iowa Republican Sen. Charles Grassley, chairman of the Senate Finance Committee, and its ranking Democrat, Sen. Max Baucus of Montana, said a retroactive effective date is justified because the companies were warned last year that Congress intended to eliminate so-called tax havens.