U.S. Senator Kirsten Gillibrand is calling for bold actions to invest in American companies, protect jobs, and ensure coronavirus relief funds are reinvested in the United States economy. Gillibrand recently cosponsored the bicameral No Tax Breaks for Outsourcing Act, legislation that would protect U.S. jobs by ending tax incentives created by the 2017 Trump tax giveaway bill, which send jobs and profits overseas. The bill would ensure multinational corporations pay the same tax rate on profits earned abroad as they do in the United States and, by doing so, could save $77 billion in revenue annually to fund priorities like infrastructure. Many businesses in New York and across the country have sent domestic manufacturing jobs overseas to low-cost, low-wage countries as companies aim to cut costs and increase profit.
Additionally, Senator Gillibrand joined Senate Democrats in urging President Biden to temporarily suspend trade waivers that could allow foreign companies to bid on projects funded by the American Rescue Plan. In an effort to give U.S. companies and their workers a fair shot at these government contracts and ensure COVID-19 relief and recovery funds are reinvested in the U.S., Gillibrand and her colleagues are pushing to close loopholes that allow foreign firms — which do not have American workers or pay American taxes — to bid as American companies. By suspending these waivers while trade-pact terms are renegotiated with our trade partners, the United States would put Americans back to work, reduce shortages for crucial items like Personal Protective Equipment (PPE), ventilators, and chemical inputs for pharmaceuticals, and boost domestic industries responsible for those products.
“We have to level the playing field for New York’s workers and invest in American companies in order to rebuild our economy. The pandemic has put millions of Americans out of work and we can no longer allow manufacturing companies to move facilities overseas for cheap labor that pads the pockets of the wealthy,” said Senator Gillibrand. “During this critical time, it’s important that we return outsourced jobs and prevent outsourcing in the future — on top of that, we have to ensure that relief funds and recovery efforts are reinvested here at home. The enactment of these commonsense policies could generate significant revenue for use in job creation, investments in infrastructure, health care and clean energy manufacturing. In the months ahead, I will keep fighting to strengthen American industry and bring good paying jobs back to New York.”
Specifically, the No Tax Breaks for Outsourcing Act would repeal offshoring incentives by:
- Equalizing the tax rate on profits earned abroad to the tax rate on profits earned here at home. It would end the preferential tax rate for offshore profits by eliminating the deductions for “global intangible low-tax income” (GILTI) and “foreign-derived intangible income” and applying GILTI on a per-country basis.
- Repealing the 10 percent tax exemption on profits earned from certain investments made overseas. In addition to the half-off tax rate on profits earned abroad, the Trump tax exempts from taxation entirely a 10 percent return on tangible investments, such as plants and equipment, made overseas. Our bill would eliminate this offshoring incentive.
- Treating “foreign” corporations that are managed and controlled in the U.S. as domestic corporations. Ugland House in the Cayman Islands is the five-story legal home of over 18,000 companies, many of them really American companies in disguise. This section would treat corporations worth $50 million or more and managed and controlled within the U.S. as the U.S. entities they in fact are, and subject them to the same tax as other U.S. taxpayers.
- Cracking down on inversions by tightening the definition of expatriated entity. This provision would discourage corporations from renouncing their U.S. citizenship. It would deem certain mergers between U.S. companies and smaller foreign firms to be U.S. taxpayers, no matter where in the world the new companies claim to be headquartered. Specifically, the combined company would continue to be treated as a domestic corporation if the historic shareholders of the U.S. company own more than 50 percent of the new entity. If the new entity is managed and controlled in the U.S. and continues to conduct significant business here, it would continue to be treated as a domestic company regardless of the percentage ownership.
- Combating earnings stripping by restricting the deduction for interest expense for multinational enterprises with excess domestic indebtedness. Some multinational groups reduce or eliminate their U.S. tax bills by concentrating their worldwide debt, and the resulting interest deductions, in its U.S. subsidiaries. This section would disallow interest deduction for U.S. subsidiaries of a multinational corporation where a disproportionate share of the worldwide group’s debt is located in the U.S. entity, a tactic commonly known as “earnings stripping.” The limit for each U.S. subsidiary would equal the sum of the subsidiary’s interest income plus its proportionate share of the corporate group’s net interest expense.
- Eliminating tax break for foreign oil and gas extraction income. Oil and gas extraction income earned abroad gets a further break on the already half-off rate other industries pay on their offshore profits. This provision would eliminate this special tax break for big oil and gas companies.
Senator Gillibrand is Senate lead of the bicameral End Outsourcing Act. In addition to the tax changes included in the No Tax Breaks for Outsourcing Act, the End Outsourcing Act would prohibit companies who outsource from using federal tax incentives like tax breaks and federal contracts. In addition, the bill offers a 20% tax credit for companies to bring jobs back to the United States; the tax credit will help pay for permits fees, leases, and general moving costs of relocating a new facility or new jobs into the country. It also enforces federal agencies to require companies to make mandatory disclosures — on applications for grants, loans, or loan guarantees — if they have outsourced jobs within the last three years. The legislation is designed to ensure that federal contracts, loans, and grants funded by taxpayers support companies that employ American workers.