Out of the Woods

Paying big business to send jobs off-shore.

Would you believe it? The US government, the government you and I elect, has had a tax policy for 50 years or more that encourages companies to send jobs off-shore. President John F. Kennedy spoke out against it in 1961. But nothing happened.

A company--GE and IBM are examples--may build a plant in Asia and produce products previously produced at home. American workers lose their jobs.

One reason for doing that is, obviously, that wages are higher in the US than anywhere else in Asia. But there are other benefits. The profit IBM makes from its foreign subsidiary are tax free as long as the money remains outside the US. If IBM has a profitable operation in Taiwan or in Thailand, they only pay taxes on those profits if they send them home. If they use them to invest in Taiwan or Thailand or anywhere else outside the US, they pay no taxes to Uncle Sam. Not only is there a tax incentive for producing goods abroad and thus shipping jobs out of the country, but there is also a tax incentive for re-investing their profits abroad and not here at home where it would create more jobs.

USA Today reports that “From 2000 through 2005, U.S. multinationals eliminated 2.1 million jobs at home while adding 784,000 to their payrolls abroad, according to the Bureau of Economic Analysis. At the end of 2005, the most recent statistics available, U.S. corporations employed almost 9 million people outside the United States.”

During the campaign and during the early weeks of his administration, Pres. Obama promised to reform the tax code. Multinational corporations, the US Chamber of Commerce and other have been lobbying furiously against this change in the tax code. So nothing may come of it.

The government--your and my government--will continue to reward large American corporations for job creation elsewhere while taking work from American workers and bread out of the mouths of their families.