U.S. companies that close domestic plants and open new ones overseas would see their taxes increase under a bill Democrats are bringing before the Senate Tuesday for one of the last votes before lawmakers head home for the November election.
Companies that import jobs to the U.S. would get new tax breaks.
Republicans and possibly a few Democrats are expected to block the bill on a procedural vote Tuesday. They say the tax increases would make U.S. companies less competitive.
Democrats orchestrated the vote to show sympathy with voters who believe American jobs are being lost because U.S. companies are outsourcing them overseas. With the economy still sluggish and unemployment hovering near 10 percent, Democrats hope to use the issue to score points with voters as they fight to maintain majorities in both the House and Senate.
“We’re going to take away the incentives corporations have to send our jobs overseas, and give them powerful new incentives to keep American jobs in America,” said Senate Majority Leader Harry Reid, D-Nev. “Right now our tax code actually rewards corporations for offshoring jobs. It helps them pay the costs of closing their plants and offers them tax breaks if they move production to other countries.”
The bill would exempt companies that import jobs from paying the 6.2 percent Social Security payroll tax for new U.S. employees who replace overseas workers who had been doing similar work.
The two-year exemption would be available for workers hired over the next three years. The tax cut — estimated to cost about $1 billion — would be partially offset by tax increases on companies that move jobs overseas.
The bill would prohibit firms from taking deductions for business expenses associated with expanding operations in other countries. It would increase taxes on U.S. companies that close domestic operations and expand foreign ones to import products to the U.S.
“We’re just a few weeks away from an election,” said Sen. Dick Durbin, D-Ill. “I wish this election would be a simple referendum on the debate we’re having on the floor of the Senate right now.”
Republicans argue the tax cuts would be difficult to administer and the tax increases would hurt international corporations that employ U.S. workers.
“Let’s have votes on real job creation incentives and let’s get out of this gamesmanship,” said Sen. Chuck Grassley of Iowa, the top Republican on the tax-writing Senate Finance Committee.
The tax increases total $369 million over the next decade, according to a preliminary estimate by the nonpartisan Joint Committee on Taxation. Combined with the tax cut, the bill would add an estimated $721 million to the budget deficit over the next decade.
Source: The Associated Press.