Over the last 10 years, 50,000 manufacturers have moved their factories out of the United States. That equates to a loss of 6 million American middle-class jobs.
There are a number of reasons why companies move out of the United States: lower labor costs, less regulation, fewer environmental constraints … and while these factors that we can’t control in the United States are elements in decisions to offshore, they are not the only factors. The American tax structure is another driver behind companies like Bain Capital deciding to offshore American middle-class jobs.
The U.S. tax code defers taxes on profits of foreign subsidiaries of an American corporation. Profits earned in the United States are subject to the 35 percent corporate tax. But multinational corporations can defer paying U.S. taxes on their overseas profit until they return to the United States — reinvesting the money tax-free, and waiting for tax rates to drop to bring it home.
General Electric, for example, has $62 billion in “undistributed earnings” parked offshore according to 2008 Securities and Exchange Commission filings. Drug giant Pfizer boasts $60 billion and ExxonMobil $56 billion.
The deferral clause of our tax code has been in place for over 60 years. There have been a series of failed attempts to eliminate the clause beginning with President Kennedy’s 1961 effort.
President Kennedy understood that giving business a tax incentive to offshore jobs would ultimately underfund vital services such as education, public safety, and health care, and undermine America’s middle class economy.
In a time of 8 percent unemployment, our nation can’t afford to continue to provide tax incentives that undermine our efforts to rebuild America’s middle-class economy.
Senate Bill 2884, The Bring Jobs Home Act, co-sponsored by U.S. Sen. Jeff Merkley (D-Ore.), closes some of the tax incentives to offshore jobs. As importantly, it provides a tax credit of up to 20 percent of a company’s relocation cost when their business moves back to the United States.
All too often, union critics characterize us as anti-trade. We are not anti-trade. We support fair trade. A fair trade policy doesn’t exploit workers or the environment for the sake of profit. Fair trade is the bill of goods the American worker was sold when NAFTA was passed in the early ’90s. Some of you remember the pitch: NAFTA would be an American job creator while improving the living standards of workers globally. NAFTA and the trade agreements that have followed have lowered the standards for American workers, and done little better elsewhere.
Even fair trade, though, won’t work if our government is providing financial incentives to send jobs overseas. While the Bring Jobs Home Act doesn’t overturn out-of-balance trade agreements, it does begin the process of reversing the financial incentives for American companies.
As of this writing, U.S. Sen. Ron Wyden (D-Ore.) had not signed on to the Bring Jobs Home Act. I encourage you to call Sen. Wyden at 888-659-9401 and ask that he support the Bring Jobs Home Act. You can also check our web site at www.oraflcio.org to find out who else from Oregon’s Congressional delegation is on our side when it comes to the Bring Jobs Home Act.