RedStorm

I have heard this line from just about every Dem talking head and I was wondering how this is actually working... So, I decided to come and ask people on this board (who are usually more informed than most)...

Can you tell me how corporations are able to ship jobs overseas and are doing so to get taxbreaks.

Thanks.

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Absolute Zero

Today's tax code encourages U.S. companies to offshore American jobs. Suppose a U.S. corporation establishes a foreign subsidiary that earns $100 million. The foreign country has a 20-percent corporate income-tax rate, so it collects $20 million. If the subsidiary repatriates the earnings to the U.S. parent, it must pay an additional 15 percent, or $15 million, to the IRS (the difference between the foreign country’s tax rate, 20 percent, and America’s corporate tax rate of 35 percent). If the subsidiary keeps the money offshore and invests it in factories and jobs overseas, it can shield $15 million from Uncle Sam (known as deferral). So, the U.S. tax code actually encourages companies to invest in Bangalore and Dublin, and not in Dayton and Pittsburgh. It tilts the playing field against American workers.

--Note that the author of this argues against Kerry's formal proposal and that the problem is due to market conditions, not tax code http://www.nationalreview.com/nrof_c...0410120902.asp

There is another discussion here which includes the following:

http://www.democraticunderground.com...134065#1134141

plus US corporations don't have to pay into FICA, workman's comp, etc.
by hiring slave labor in foreign nations. Also, healthcare is often
taken care of by the state or national or non-existence, so that's an additional savings gotten by offshore outsourcing.

They can also bring in the finished product as an import and avoid
any taxes as profits as a US domestic product.

they can also keep the profits in the foreign country so it never gets taxed at (US domestic tax rate - foreign corporate tax rate) which is the net difference when you bring in the money from overseas operations.

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RedStorm

Thanks.... I appreciate it.

So, I am still not seeing the tax break that the Government gave to corporations to say...ship jobs overseas. What I read is that corporations in America are being taxed higher here than overseas. I see the obvious tax advantage...But, where is it that we gave tax breaks to ship overseas? Was the law different at one time?

__________________
The greatest lies are told before a marriage, after a hunt and during an election - Count Bismark

RedStorm

ttt...

Just want to get some more discussion on this topic if possible....

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The greatest lies are told before a marriage, after a hunt and during an election - Count Bismark

Heucrazy

From reading AZ's post I'm guessing that there is a loophole in tax laws that corporations have exploited and now it has become a Democrat talking point during the election.

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DWKB

My best guess (please note guess) is that back in the Kennedy days, we viewed capitalism as our beacon of light over the communist threat that we faced at the time. So Kennedy promoted legislation that actually created incentives for corporations to produce offshore through tax loopholes.

As the telcom boom hit along with the web in the early 90's the world flattened and capitalism did what it does best. This wasn't perceived back in the 60's of course and now the tax laws that haven't changed actually hurt American workers because the times have changed. It used to be that the tax incentives needed to be there because of the extra cost in setting up facilities and getting the product delivered, back when we built widgets. Now it's not so and with the corporation not beholden to a single country or it's laws globalization races to the bottom bidder.

KloD

http://www.factcheck.org/askfactchec..._does_the.html

Q:
What kind of tax breaks does the U.S. give to oil companies and to corporations that send jobs overseas?
When Democratic presidential candidates talk about tax breaks for corporations that ship our jobs overseas and tax breaks and subsidies for oil companies, what are they referring to and are they accurate?

A:
Companies with overseas subsidiaries can keep their income untaxed by the IRS if they don't transfer that revenue back to the U.S. Oil and gas companies received tax breaks and subsidies from a 2005 energy bill, but the bill led to a net tax increase for them.

It’s true that Sens. Hillary Clinton and Barack Obama have associated the transfer of U.S. jobs overseas with tax breaks, or loopholes, for companies that practice off-shoring:

Obama, Nov. 3, 2007: When I am president, I will end the tax giveaways to companies that ship our jobs overseas, and I will put the money in the pockets of working Americans, and seniors, and homeowners who deserve a break.

Clinton, Nov. 19, 2007: And we are going to finally close the tax loopholes and stop giving tax breaks to companies that ship jobs overseas. Enough with outsourcing American jobs using taxpayer dollars.

Both candidates are referring to a feature of the U.S. tax code that allows domestic companies to defer taxes on “unrepatriated income.” In other words, revenue that companies earn through their overseas subsidiaries goes untaxed by the IRS as long as it stays off the company’s U.S. books.
But economists, including left-leaning ones, do not agree that eliminating this provision will bring an end to off-shoring. And here’s why: In the U.S., companies are taxed 35 percent on earnings of $10 million to $15 million or on all earnings over $18.3 million. That’s one of the highest corporate tax rates in the world, making an overseas move somewhat attractive to companies that wish to avoid the U.S. tax rate. But that's not the leading reason companies send jobs overseas. According to a 2005 report by the Government Accountability Office, global technological advancement, increased openness of countries such as China and India, the higher education level of foreign workers in technological fields, and the reduced cost per foreign worker are all contributing factors to off-shoring.

We first addressed this popular theme in 2004, when we reported on a John Kerry campaign ad in which he blamed President George W. Bush for providing tax incentives to companies “outsourcing” jobs overseas. At the time we found that such tax breaks, which do exist, pre-dated the Bush administration and that even Democratic-leaning economists did not support the idea that changing the corporate tax code would end the movement of jobs overseas.
Three years later, in Dec. 2007, we reported on an ad launched by a labor group in support of John Edwards. The ad implied that corporate tax breaks were responsible for the shipment of jobs overseas from an Iowa Maytag plant. We found that the jobs were actually sent to Ohio and that, again, eliminating such tax breaks would not go far in stanching the flow of jobs overseas.



Both leading Democratic candidates have referred to tax breaks to oil companies:

Clinton, July 23, 2007: First of all, I have proposed a strategic energy fund that I would fund by taking away the tax break for the oil companies, which have gotten much greater under Bush and Cheney.

Obama, June 22, 2007: In the face of furious lobbying, Congress brushed aside incentives for the production of more renewable fuels in favor of more tax breaks for the oil and gas companies.

Both candidates are referring to H.R. 6, the 2005 energy bill that contained $14.3 billion in subsidies for energy companies. However, as we’ve reported numerous times, a vast majority of those subsidies (all but $2.8 billion) were for nuclear power, energy-efficient cars and buildings, and renewable fuels research. In addition, according to the nonpartisan Congressional Research Service, the tax changes in the 2005 energy bill produced a net tax increase for the oil and gas companies, as we’ve reported time and time and time again. They did get some breaks, but they had more taken away.