Tax Incentives to Keep Jobs in U.S. Blocked in Senate

The U.S. Senate failed to advance legislation that would create tax breaks for companies that move foreign-based jobs to the U.S. and penalize those that send jobs offshore.

The 53-45 vote was short of the 60 needed to move the measure forward; four Democrats and independent Joe Lieberman of Connecticut voted with 40 Republicans against allowing formal consideration of the bill. Debate on the measure was tinged by partisan claims ahead of the Nov. 2 elections in which polls show Republicans are poised to gain seats in Congress.

Democrats said Republicans were obstructing efforts to combat “outsourcing” of U.S. jobs. Republicans said the bill would hurt the U.S. economy and accused Democrats of trying to change the subject from the majority party’s decision to wait until after the election to vote on preventing income-tax increases set to take effect Jan. 1.

“We want to export products, not jobs,” Senator Debbie Stabenow, a Michigan Democrat and one of the bill’s sponsors, said during floor debate today. “For me, this is a fight about whether or not we’re going to make things in America.”

The offshore-jobs legislation would waive for two years the 6.2 percent payroll tax for employees hired by U.S.-based companies to replace workers who performed the same job overseas. That would save companies about $1 billion in taxes over the next three fiscal years, according to the Joint Committee on Taxation.

Foreign Labor

The bill would deny deductions and tax credits for expenses related to transferring an existing U.S. job abroad. It also would raise taxes on income created by foreign labor that replaced U.S. jobs.

The Senate Democrats voting against the bill’s advancement were Max Baucus and Jon Tester of Montana; Mark Warner of Virginia, and Ben Nelson of Nebraska. Lieberman, who also voted no, caucuses with Democrats.

Senator Charles Schumer, a New York Democrat and a sponsor of the bill, told reporters last week the measure would use a “carrot and a stick” to keep jobs from being moved overseas.

Senate Republicans and business groups, including the U.S. Chamber of Commerce, said the tax increases would make it harder for U.S. companies to compete globally and would ultimately undercut efforts to create jobs in this country.

Competing With Rivals

Iowa Senator Charles Grassley, the top Republican on the Senate Finance Committee, said tax increases on products manufactured in foreign countries by U.S.-based companies, and sold back to U.S. consumers, would hurt companies’ ability to compete with foreign rivals.

“We’re going to lose business and lose jobs in the process,” Grassley said.

Illinois Senator Richard Durbin, the second-ranking Democrat in the chamber, told reporters last week that Democrats feel “a greater sense of urgency” to act on the offshore-jobs bill than on extending the Bush-era income-tax cuts before the election.

Democrats want to renew the tax cuts for families earning up to $250,000, about 97 percent of U.S. taxpayers, and let taxes rise for those with higher incomes. Republicans want to keep the cuts for wealthier taxpayers as well. The tax cuts will expire Dec. 31 if Congress takes no action.

The bill voted on today is S. 3816.

To contact the reporter on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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