A Giant Tax Cut for Corporations That Outsource Jobs

The Republican tax bill would give a giant tax cut to big corporations that outsource jobs.

 

Under the bill, a business that creates jobs on Main Street USA would pay U.S. taxes on its profits at a rate of 20%, while a big corporation that outsources those same jobs to Ireland or Switzerland would pay NO U.S. TAXES on the profits it earns from outsourcing.

Why is this so?

Currently, the United States taxes all profits of U.S. corporations, whether earned in the United States or in a foreign country, at the same rate of 35%. However, a corporation that earns profits in a foreign country does not have to pay U.S. taxes on those earnings until it repatriates them to the United States.

The GOP tax bill changes this system so a U.S. corporation that earns ordinary profits in a foreign country never pays any U.S. income taxes on those profits. By "ordinary," I mean earnings from active operations in foreign countries, not domestic profits earned in the United States that the company disguises as foreign profits through the use of accounting gimmicks.

Reducing the U.S. tax rate on offshore profits from 35% to 0%—basically a subsidy to companies that outsource jobs—would cost $208 billion over 10 years.

Even worse, the bill would encourage foreign countries that want to attract offshore investment to lower their corporate tax rates or to create tax-free export processing zones. The more that other countries lower their corporate tax rates to attract offshore investment, the bigger the tax subsidy for offshoring this bill will provide. This also would render the decision to lower the U.S. domestic corporate tax rate to 20% meaningless for "competitiveness" purposes.

The GOP tax bill creates a powerful incentive for big companies to outsource jobs, and it is an incentive that will grow over time. The bill also would put small businesses that cannot move jobs or profits outside the United States at a competitive disadvantage.

That's why the GOP tax bill is a job killer and a gift to outsourcers.

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