WASHINGTON — Silicon Valley multinationals such as Apple and Google that are already sheltering hundreds of billions of dollars in overseas tax havens may pay little or no U.S. tax on future overseas profits under legislation Republicans are racing to enact.

It’s been largely overlooked amid controversies over how the new tax bills would affect households, but a wholesale change in the way the federal government would tax foreign profits is at the core of the GOP tax overhaul that the House passed this month and the Senate could approve in its own version this week.

Currently, the U.S. government taxes foreign earnings at the same 35 percent corporate rate charged on domestic profits, but only when the foreign earnings are returned to the United States. Under the bills moving through Congress, overseas profits would be mostly excluded from U.S. taxation.

Instead, those profits might be taxed by the nations where the profits were earned, reflecting a “territorial” system like many countries in Europe now use.

“The starting point for the House and Senate bills is that if it’s U.S. income, we’re going to tax it, but if it’s foreign income, we’re not going to tax it at all, ever,” said Matthew Gardner, a senior fellow at the Institute on Taxation and Economic Policy, a left-leaning research group.

Paired with a dramatic cut in the corporate tax rate from 35 to 20 percent, the new system is intended to make U.S. multinationals more competitive by adopting a corporate tax system similar to those used in many other developed countries. These countries tax corporate income at around 20 percent, and impose little or no tax on profits earned abroad.

Supporters of the plan say U.S. companies would still have to pay taxes to the governments of the countries where they post their earnings. So if the tax rates in those countries are on a par with the U.S. corporate tax rate, they argue, companies will face a level playing field and have less incentive to move their profits abroad.

“This is about putting us on par with our peers in the industrialized world,” said Gavin Ekins, an economist at the Tax Foundation, a conservative-leaning research group. “This is something that the public doesn’t really understand. They just see it as a benefit to these corporations, but it’s a lot more about being competitive and being similar to our peers.”

The stated aim is to fix what is universally seen as a big flaw in the tax system that has encouraged U.S. companies to park an astonishing $2.6 trillion overseas and out of the U.S. Treasury’s reach, much of it in Caribbean and European havens that assess extremely low or no taxes on corporate earnings. The companies do not have to pay U.S. tax on the money until they bring it home.

Many never do. The biggest names in American business are now routinely using these havens to stash their profits. Kimberly Clausing, an economist at Reed College in Oregon, estimates that by doing so, U.S. multinationals avoid $100 billion in taxes each year.

Clausing and other critics say there are better ways to fix the problem than to charge little or no tax on overseas profits. They say the proposed new system will only invite U.S. companies to move more cash offshore, because the rate on overseas profits in low- or non-taxing countries will still be much lower even than the new 20 percent U.S. corporate tax rate.

Tax havens are particularly well suited to technology, pharmaceutical and big-brand companies like Starbucks and Nike. A big chunk of their assets is intangible intellectual property such as patents, algorithms and trademarks that are easy to shift to paper subsidiaries in countries such as the Cayman Islands or Bermuda, neither of which tax corporate earnings.

A 2013 Senate investigation found that Apple had diverted nearly two-thirds of its pretax revenue through Irish subsidiaries that claimed the rights to its intellectual property and accompanying royalties. The company had no physical presence in Ireland and was beyond the reach of any tax authority. A particularly aggressive strategy went by the nickname “double Irish with a Dutch sandwich,” and involved moving intangible assets through various jurisdictions to avoid taxes.

A trove of newly revealed financial documents called the Paradise Papers showed that after Irish authorities cracked down on the “double Irish,” Apple shifted its income to the island of Jersey, one of the Channel Islands off England’s coast that does not tax income. Jersey is a British crown dependency but not part of the United Kingdom.

In response to a New York Times report on the shift in Apple’s strategy, the company issued an extensive statement on Nov. 6, asserting that it is the largest taxpayer in the world and has paid more than $35 billion in corporate income taxes over the past three years, with an effective tax rate of 24.6 percent, “higher than average for U.S. multinationals.”

Gabriel Zucman, an assistant economics professor at UC Berkeley, estimates that U.S. multinationals now “earn” 63 percent of their foreign profits in just six tax havens, mainly the Netherlands.

Zucman said that in 2015, Google’s parent company, Alphabet, “made $20.5 billion in profits in Bermuda, where the corporate tax rate is zero, not because they employ many people in Bermuda or have real activity there. They don’t. It’s because they artificially shift their profits on paper to Bermuda.”

Both the House and Senate bills have complex provisions to try to prevent multinationals from gaming the system, supporters of the tax plans say. The Tax Foundation’s Eakins said these would make the tax havens less attractive by assessing a kind of minimum tax on corporations that shift paper profits to low-tax jurisdictions.

But Reed College’s Clausing disputes that, saying these provisions have been written in a way that will encourage even greater use of tax havens.

“They are basically exempting all future returns to foreign income from tax, but taxing U.S. earned income at 20 percent,” Clausing said. “Zero is less than 20 percent just like zero is less than 35 percent.”

Eric Toder, a senior fellow at the moderate-left Tax Policy Center, said moving to a system where overseas earnings are not taxed requires clear rules to distinguish between domestic and foreign income, a difficult task when dealing with multinationals. In a recent paper, he found that the use of tax havens is “eroding territorial systems around the world,” including the European systems that Republicans want to copy.

UC Berkeley Professor Alan Auerbach, one of the nation’s top fiscal scholars, said he’s “not a big fan” of territorial tax systems, but thinks the legislation’s new low corporate rate on domestic earnings and the complex provisions to prevent gaming might help offset its incentives to move corporate activity offshore.

But he said the tax proposals in Congress are part of a global race to the bottom on corporate taxation. The United Kingdom is considering cutting its corporate tax rate from 19 to 17 percent, and France is also considering cuts, Auerbach said.

A 20 percent U.S. corporate tax rate “may look pretty good to us now, but in five years, maybe we’ll need 15 percent,” he said.

In joining this race, the House and Senate bills would also accelerate the shrinking of corporate taxes as a share of federal revenue. In 1954, corporate taxes were 6 percent of gross domestic product, but now make up just 2 percent, according to the Tax Policy Center. That has shifted the federal tax burden onto other businesses and households.

Far from solving this problem, the House and Senate bills would make it worse, Auerbach said.

“They’re going to lose a lot of corporate revenues,” he said. While eliminating many middle-class tax deductions, as proposed in the bills, will fill some of the gap, he said “the rest is going into the deficit.”

Within a decade, both the House and Senate plans are expected to increase the national debt from 77 percent of the total economy to 97 percent, according to outside estimates. Within 20 years, the national debt would be much bigger than the size of the entire economy, an estimated 123 percent of gross domestic product.

“People should be paying a lot more attention to this,” Clausing said. “It’s dangerous to the future competitiveness of the United States.”

Carolyn Lochhead is The San Francisco Chronicle’s Washington correspondent. Email: clochhead@sfchronicle.com Twitter: @carolynlochhead

Hide and seek

Here are the top 10 California companies that shelter their profits in overseas tax havens, according to data from the Institute on Taxation and Economic Policy, a nonpartisan, nonprofit research organization:

Apple $252.3 billion Cisco Systems $65.6 billion Google $60.7 billion Oracle $47.5 billion Chevron $46.4 billion Intel $46.4 billion Gilead Sciences $37.6 billion Amgen $36.6 billion Qualcomm $32.5 billion Hewlett Packard Enterprise* $26.2 billion

* In November 2015, Hewlett-Packard split into two companies. Hewlett Packard Enterprise focuses on servers and networking equipment, while HP Inc. produces personal computers and printers.