Offshoring is a political football, though it remains largely out of play until election season, particularly in years like this one when there is widespread concern over domestic unemployment. This time it's the Democrats trying to use it to score some points. That's pretty common, since Democrats tend to go after the support of labor unions. Republicans often portray themselves as the party trying to remove legislative obstacles to doing business, which for many companies today includes global trade.
Thus Democrat senators are playing up last week's failure to advance the Creating American Jobs and Ending Offshoring Act as Republicans not caring about the economic concerns of middle-class Americans. Meanwhile, Republicans insist it was a bit of political theater designed to win voter support before a round of elections Democrats are worried about losing. The truth is probably somewhere in the middle. Heck, four Democrat senators and an independent, Connecticut's Joseph Lieberman, also voted against the bill.
The U.S. Chamber of Commerce opposed the bill, reported The Huffington Post, noting in a letter to the Senate that "the concept of economic growth is not a zero-sum game. Replacing a job that is based in another country with a domestic job does not stimulate economic growth or enhance the competitiveness of American worldwide companies." I'd argue that even opponents of offshoring realize it isn't that simple.
As The Washington Post's Ezra Klein wrote, the bill just wasn't a very good one. Perhaps the biggest problem was its provision for a two-year break on payroll taxes for every new employee that businesses can certify is "replacing an employee who had been performing similar duties overseas." As Klein points out, that'd be pretty hard to prove and even harder to police, providing "a new loophole for smart corporate accountants to game." Many businesses would probably make the case that any U.S. hire could conceivably replace an existing employee overseas. It's difficult to imagine big companies making any truly meaningful staff changes for a temporary tax break.
Another portion of the bill sought to end tax deferrals, a common corporate practice targeted by President Obama last spring..As I wrote then, technology companies came out in force against it, probably because multinational tech giants like IBM, HP and Microsoft all employ it. I cited a story in which the CEO of the Silicon Valley Leadership Group called Obama's proposal to end the practice "about a 20" on a Richter scale of one to 10. A third provision sought to prevent companies from taking a tax deduction or credit if they closed a domestic operation and opened a similar one overseas.
Again, wrote Klein, it's hard to imagine how either of those two provisions would be enforced. There are simpler and more elegant ways of discouraging these practices. Just lowering corporate tax rates to bring them more in line with other countries would be one of them.