WASHINGTON - November 23, 2010 - It's bad enough when companies take U.S. jobs and move them overseas to take advantage of lower labor costs. But does the U.S. tax code actually offer an incentive for firms to engage in such offshoring?
That was the assertion of Senator Sheldon Whitehouse earlier this fall when he went on the floor of the Senate to argue for a bill, designated S.3816 and known as the "Creating American Jobs and Ending Offshoring Act."
The proposal, he said, "would close some really perverse loopholes in the tax code that, right now, reward Amerikan companies for moving Amerikan jobs overseas. The law right now permits companies that close down Amerikan factories and offices and move those jobs overseas to take a tax deduction for the costs associated with moving the jobs to China or India or wherever."
There's nothing controversial about allowing companies to deduct their expenses for doing business, but does the tax system actually help companies cover the cost of moving local jobs to another country?
Absolutely, said Thea Lee, deputy chief of staff of the AFL-CIO, a 12-million member labor organization that opposes offshoring. "You can take a business deduction for the costs associated with moving the job. So if you close down your factory in Providence, pack everything up and have to train the workers and ship the machinery overseas, all the costs associated with that are tax deductions," she said.
As a result, companies get back roughly a third of their expense at the expense of U.S. taxpayers, she said.
"There have been a lot of attempts over the years to get rid of this," but corporation lobbyists have argued that the loophole is needed because it creates more jobs,” said Lee. "You can believe that or not. I don't give it a lot of credence."
