Failed Offshoring Bill Just Not a Very Good Piece of Legislation

Ann All

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.



Add Comment      Leave a comment on this blog post
Oct 14, 2010 1:21 AM pjsicon pjsicon  says:

Money is the main motivator for everything and there is more big business pull then there is for the workers. So what big business is saying to me is "they don't care about me or us". I think we say and/or do the same thing to them in some way. A good example would be for all of us who are hurting should refuse payment to corporations. We should have a financeial revolution and put the screws to them or a super class act law suite. I needed to vent a little.

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Oct 14, 2010 2:08 AM Red Red  says: in response to pjsicon

How can you blame a corporation for looking for countries with better tax rates.  They are thinking of the people and those people are the investors.  The investors want to see continual growth.  By lowering taxes in the US they companies will thrive and in return pay more to the tax base.  When corporations succeed so does the US economy and thus the goverment takes in more taxes.

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Oct 14, 2010 2:41 AM Jon Jon  says:

Corporate Taxes could be eliminated totally and it is still not a level playing field globally. Government regulations such a minimum wage and environmental regs etc. do not exist in other countries on par with the U.S. The U.S. with the best living conditions for most of its citizens can never compete with third world companies. So either the U.S. gets dummed down to meet the rest of the world i.e. China, India etc. or the Government must make offshoring any jobs very distasteful to U.S. Corporations. If Microsoft wants to leave the U.S. so be it. The government just needs to make sure that any foreign corporations selling goods in the U.S. pay a significant import duty. Let's get over this global nice guy approach which is destroying the best country in the World. Difficult to police, you bet but that is no reason to not attempt to resolve the problem.

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Oct 14, 2010 4:28 AM Darryl Malcolm Darryl Malcolm  says: in response to Jon

Very right on.  The playing field can only be brought up by making it more expensive to import products that harm U.S. industries and job types.  Most countries' businesses which have gutted our economy and jobs market are subsidized heavily by their governments and have little regulations to deal with which drive up costs.  In addition, we have shifted too much, as human beings, of our focus on convenience and cost beingthe bottom line.  The leaders of American industry in the early part of the 20th century were capitalists, but many valued being Americans very high and wished to see this country succeed.  That flavored their business decsions (Hershey, Welch, Ford, etc) - to make money but provide Americans jobs.

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Oct 14, 2010 4:46 AM Jim Pomeroy Jim Pomeroy  says: in response to Jon

I absolutely agree, Teddy Roosevelt helped build this country into the richest nation in the world by leveraging tariffs.

If countries are going to pollute at will, have terrible working conditions, peg their currency to the dollar (thus keeping their imports to the U.S. cheap), then the only way to return the favor is to put a VAT tax on all imported goods. This is how the Europeans do it, and Germany and England seem to be doing fine operating this way.

It is time we had fair trade and not so called free trade.

jammer

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Oct 15, 2010 3:08 AM Nick Nick  says:

Your writing appears politically balanced, but you left in a 'tell' that indicates that you spend a great deal of time watching Fox news... that you refer to members of the Democratic party as "Democrat senators."

You don't say "Republic senators."

The correct word is Democratic. 

Referring to members of the Democratic party using the 'shortened' term is intended as an insult, and I took it as such. 

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Oct 15, 2010 9:03 AM Jim Pomeroy Jim Pomeroy  says: in response to Nick

The fact that someone does not use the words Democratic and Republican has to do with the fact that they were most likely writing in a hurried style and did not take the time proof read it.

In the future you may want to look before you leap. I see by your comments that you are a little sensitive. If you are going to comment on political issues you should have a thick skin and not jump to conclusions.

I am not trying to attack you here, However being accused of being a Fox watcher is to me an insult.

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Oct 15, 2010 10:39 AM Joe American Joe American  says:

Corporate Tax, minimum wage legislation, Unions and just plain politics is destrying the middle class. In todays world if we dont wake up we will all be speaking Chinese soon!

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