Taxes 101 How to Encourage Job Outsourcing

Martin Sullivan, a contributing editor at Tax Analysts (a non profit organization that tracks tax policies worldwide), says if a U.S. corporation is trying to decide whether to create jobs within the borders of the United States or in a foreign country the tax code will point the corporation to the foreign country.

 

In theory the government taxes the worldwide earnings of U.S. based companies. But under the federal tax code, American companies have to pay taxes only on the earnings of their foreign subsidiaries when they bring that money back to the States. But there is no rule that requires those companies to bring that money home. As long as they reinvest their foreign earnings abroad, they pay only the host country's (usually lower) tax rate.

 

Many companies just reinvest the money they make overseas back into their foreign operations. That means more economic growth for other countries and less here at home. A 2006 report by the nonpartisan Congressional Research Service puts it; this scheme is "an incentive for U.S. corporations to invest abroad in countries with low tax rates."

 

According to 2006 government report U.S. companies have nearly $500 billion stashed abroad that could be taxed at home. Security Exchange Commission records show General Electric had $62 billion stowed overseas; Pfizer, $60 billion, and Exxon-Mobil, $56 billion. A 2004 Tax Analysts study found that U.S.-based multinationals shifted $50 billion in income to countries with lower taxes. The tax laws, written during the Kennedy administration, benefits no one but the companies that do it.

 

Every dollar of taxes these corporations avoid shifts the burden further onto working folks. Currently the overall taxes paid by corporations is less than half what it was when Eisenhower was president. And this at a time when CEOs get rich while the wages of the average workers stagnate and everyone gets hit with higher health care and energy costs.

 

American workers are in effect subsidizing, through taxes, their own job losses. Congress could change the law to tax overseas earnings at the same rate as domestic income. Another idea would be to reward companies investing here at home. Congress needs to apply the law with common sense and fairness.

 

Since not many CEOs want to move to the countries where they have subsidiaries businesses relocating would not be a major issue. They would rather avoid the unpredictable social and legal factors in foreign countries.

 

Changing the tax code can not stop jobs from going overseas. Profit-minded companies will always seek out places where labor is cheaper, almost regardless of the tax consequences. Even though we can't do anything about wages abroad, we can stop Washington from rewarding companies for investing overseas at the expense of American workers.

 

As your representatives what they are doing about this issue, http:/www.house,gov and http/www.senate.gov.

 

Contact House, senior Ways and Means Committee members Charles Rangel and Jim McCrey and Senate (senior finance members are Max Baucus and Charles Grasley. www.congress.org

Learn more  a Center on Budget and Policy Priorities www. Cdpp.org and Citizens for Tax Justice www.ctj.org

 

Regards,
John Jenkins

865-803-8179 cell

Gatlinburg, TN
Email: jrjenki@yahoo.com 

Website: http://www.greenbriersolutions.com 
Blog: http://littlepigeon.blogspot.com/

Hyperbole is the Best Thing Ever.