WE THE PEOPLE: Big Business uses tax loophole to send jobs overseas

Opinion

May 12, 2009

By Joe Parko / Chronicle contributor The Crossville Chronicle Tue May 12, 2009, 05:05 PM CDT

Big business is gearing up for what may be an epic battle with the Obama administration over its efforts to reform the practice of offshore tax deferrals which allow companies to avoid paying U.S. taxes on profits made overseas as long as they remain there. This tax loophole actually encourages American companies to invest more money in their overseas operations instead of here at home.

Huge multinational corporations such as General Electric, McDonald’s and Microsoft have joined forces with lobbying groups like the U.S. Chamber of Commerce, the National Foreign Trade Council and the National Association of Manufacturers to create the Joint Committee on Taxation. The group, made up of 200 multinational corporations and trade associations, was created for the sole purpose of opposing the Obama administration’s proposal.

The U.S. Chamber of Commerce, hardly a friend to the working man, has been a force to be reckoned with in the political world for some time. The deep-pocketed organization has the ability to sway votes in Congress and elect candidates friendly to big business. In 2008, the organization spent $53 billion on lobbying and sent 3.7 million pieces of mail, placed 5.6 million phone calls and sent 30 million email messages in support of the big business legislative agenda.

The Chamber and its allies have used this inordinate amount of influence to skew the debate on the tax deferral issue, painting it as a net positive for Americans even though all the evidence suggests otherwise. They are now claiming that ending the tax loophole would make American businesses less competitive abroad and hamper America’s economic recovery.

President Obama disagrees and is banking on the American public to share that sentiment as well.

“It’s a tax code full of corporate loopholes that makes it perfectly legal for companies to avoid paying their fair share. It’s a tax code that makes it all too easy for a number — a small number of individuals and companies to abuse overseas tax havens to avoid paying any taxes at all,” the president said. “And it’s a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York.”

Jobs are the crux of the argument for the proponents of offshore tax deferral reform. As the current system is set up, American multinational corporations are not required to pay taxes on the profits of foreign subsidiaries unless those profits are returned to the United States. This, critics of the tax policy claim, encourages overseas investment and the offshoring of American jobs.

As many as 3 million American jobs have been moved offshore in the past five years and the U.S. Treasury loses tens of billions of dollars a year in offshore tax evasion. Instead of bringing the cash back home and investing in technologies, factories and research that would create American jobs, those companies instead seek out tax havens overseas or the cheap labor of Third World countries to improve their bottom line. In the end, the American taxpayers are the ones that lose out. Not only do jobs disappear to China, India or Brazil, but then the taxpayers are also forced to cover the loss of billions of dollars in tax revenues and in some cases foot the bill for a federal bailout of those same companies.

Closing these corporate tax loopholes will save $210 billion over the next decade and help offset tax cuts for middle-income Americans. More importantly, closing these loopholes will mean saving millions of American jobs.

Contact the President and your Congressional representatives in Washington and tell them to resist the powerful influence of corporate lobbyists on this issue. Ending these tax loopholes for American companies that engage in outsourcing would go a long way toward restoring America’s economy by bringing jobs back home.

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