Senators Urge Administration To Outline Real Plan To Address Outsourcing

Despite GOP Promises To Protect American Workers, Current Tax Plan Could Incentivize Outsourcing

Senators Urge Administration To Outline Real Plan To Address Outsourcing

Washington, D.C. – Congressional Republicans’ tax plan includes provisions that may encourage companies to move production and jobs overseas. To ensure the Administration adheres to its numerous promises to “put American workers first,” U.S. Senators Bob Casey (D-PA), Sherrod Brown (D-OH), Debbie Stabenow (D-MI), Claire McCaskill (D-MO) and Bob Menendez (D-NJ) have penned a letter asking the Administration to prevent the inclusion of provisions in the tax bill that encourage outsourcing and outline meaningful steps it plans to take to prevent outsourcing.

Specifically, the GOP’s plan will reward U.S. companies that offshore jobs with a large tax cut on old profits unavailable to companies who keep their production in the United States. And it may allow future profits from outsourced manufacturing to never be taxed in the United States.

“Outsourcing causes job loss and wage decline and the Administration must have an effective strategy to combat it,” wrote the Senators. “The tax policies being pursued by Republicans in Congress are at odds with these objectives. We urge you to take steps to ensure that your statements on outsourcing are reflected in the positions Treasury takes in negotiations over the international components of the tax legislation with Senate Republicans.” 

The full text of the letter can be seen below:

Dear President Trump:

We write to express our support for the goal of curbing policies that encourage outsourcing and hope the United States Trade Representative will negotiate commitments in the NAFTA that contribute to this objective. However, we are concerned that the tax policy currently being drafted by Treasury and Republicans in Congress may not only undermine any such efforts, but could actually create new and more substantial incentives to outsource that far outweigh any disincentives created by the Administration’s trade policies.

Outsourcing causes job loss and wage decline and the Administration must have an effective strategy to combat it. The tax policies being pursued by Republicans in Congress are at odds with these objectives. We urge you to take steps to ensure that your statements on outsourcing are reflected in the positions Treasury takes in negotiations over the international components of the tax legislation with Senate Republicans.  

As you may know, the Republican tax bills, as drafted, will reward U.S. companies that offshored jobs with a large tax cut on old profits unavailable to companies who kept their production in the United States. A company who outsourced to Mexico to take advantage of cheap labor will pay less tax on accumulated profits than a domestic competitor who kept jobs in the United States.

Further, the permanent shift of our global tax system may allow profits derived from production in a factory overseas to never be taxed in the United States. Meanwhile a company that kept jobs here at home will be taxed at the US corporate tax rate. Specifically, a U.S. company that has or moves a manufacturing facility overseas is likely to only have ‘routine returns’ on investments, and accordingly, will likely not pay any U.S. tax on profits from those operations under the House and Senate bills.[1]

This disparity may actually encourage companies to move production and jobs overseas, opening new incentives that reach far beyond a single trade agreement or the inducement of cheap labor.  

The Republican tax plan is in serious conflict with your promise of “consequences” for sending jobs overseas. This plan may not only break that promise but achieve the opposite by opening significant new avenues and incentives for companies small, and large to offshore production and profits.

Given the stakes of this negotiation, we ask you to detail the steps your Administration is taking to ensure that the Republican tax bill is consistent with your stated opposition to outsourcing. In addition we ask that you outline efforts undertaken by Executive branch agencies, including Treasury, USTR, and the Office of the President, to develop and execute a coordinated approach to curb outsourcing.

Specifically we ask that you provide timely answers to the following questions:

(1) Whether Treasury has consulted USTR and other agencies on the impact on outsourcing from the international tax provisions currently being negotiated by Republicans in Congress.

(2) Whether an interagency policy exists to coordinate strategy on curbing outsourcing.

(3) Whether interagency guidelines exist requiring the assessment of outsourcing impact prior to the Administration’s endorsement of policy.

(4) Whether Treasury has been directed to provide analysis and assessment of the impact of the tax bill on offshoring of profits and the outsourcing of jobs.

We urge you hold firm on your promises to workers in our states and across the country and advance our mutual goal of curbing outsourcing and bringing better paying jobs home.

                                                   Sincerely,

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