March 12, 2021

Whitehouse, Doggett, Durbin Introduce No Tax Breaks for Outsourcing Act

Bill would fulfill Biden pledge to end tax incentives for big multinational corporations to ship jobs overseas; Van Hollen, Gillibrand, Merkley, Warren, Reed join in introducing key tax fairness measure; Legislation would generate significant revenue to fund priorities like infrastructure

Washington, DC – Today, Senators Sheldon Whitehouse (D-RI) and Dick Durbin (D-IL) and Congressman Lloyd Doggett (D-TX), joined by Senators Chris Van Hollen (D-MD), Kirsten Gillibrand (D-NY), Jeff Merkley (D-OR), Elizabeth Warren (D-MA), and Jack Reed (D-RI) and over 100 House members, introduced the No Tax Breaks for Outsourcing Act. The bill would level the playing field for American workers and small businesses by making sure multinational corporations pay the same tax rate on profits earned abroad as they do in the United States. This would end tax incentives created by the 2017 Trump tax giveaway bill to send jobs and profits overseas, and generate significant revenue to fund priorities like infrastructure.

“American families and small businesses fight to stay afloat in a pandemic economy while big corporations rake in profits from shifting jobs overseas,” said Whitehouse. “It’s time to roll back incentives for big multinationals to ship jobs abroad, and start helping American workers and domestic companies compete on a level playing field.”

“The 2017 Trump-GOP tax law encourages multinationals to both outsource good-paying American jobs and shift profits abroad,” said Doggett. “It’s time to add more jobs here in America and insist that profits earned from American consumers are taxed in America, not hidden in some island tax haven. The No Tax Breaks for Outsourcing Act could recover hundreds of billions of dollars in corporate taxes rightly owed on those profits, which could be invested to promote even more economic growth here in the USA.”

“The No Tax Breaks for Outsourcing Act will remove incentives for companies to take their business abroad and close the corporate inversion loophole,” Durbin said. “This bill would repeal harmful Trump-era policies that reward multinational corporations that offshore investments. It’s time to level the playing field for American businesses.”

“The 2017 Trump Tax Scam created new loopholes for corporations to offshore American jobs while funneling profits into overseas tax havens. We must immediately end these perverse incentives that reward exporting American jobs and instead invest in American workers and businesses as we build back better,” said Van Hollen.

“Instead of stopping companies from offshoring jobs, Republicans decided to pay back their donors by forcing through a tax bill that rewards billionaires and special interests. I am proud to join with my colleagues to introduce the No Tax Breaks for Outsourcing Act, which would end incentives for outsourcing and require companies to pay their fair share. The enactment of these commonsense policies could generate significant revenue for use in job creation, investments in infrastructure, health care and clean energy manufacturing,” said Gillibrand.

“The road to economic recovery on the other side of this pandemic must be paved with reliable, good-paying American jobs,” said Merkley. “That’s why it’s more important than ever that we close the gaping tax loopholes created by the Trump administration that allowed massive corporations to ship jobs and critical investments overseas. The time is now to pass the No Tax Breaks for Outsourcing Act, bring jobs back to our shores, and restore opportunities for American families in all of our communities.”

During his 2020 campaign, President Biden repeatedly called for unwinding Trump’s tax breaks for foreign profits. The No Tax Breaks for Outsourcing Act would accomplish this goal by requiring multinationals to pay the same tax rate on profits earned abroad as they do in the United States. It would also apply the tax on foreign profits on a country-by-country basis to prevent companies from dodging taxes by setting up webs of subsidiaries in low-tax countries.

President Trump and Congressional Republicans promised their new tax bill would boost U.S. hiring without costing taxpayers, but tax experts say otherwise. One prominent study found companies that benefited most from the Republican tax breaks for profits parked offshore invested more overseas following the law’s passage than they did in the United States. Another study estimates closing offshore tax loopholes could save $77 billion in revenue annually.

Ninety major public interest and labor groups have thrown their support behind the bill.

“To unrig the economy, we need a fair tax system that requires the wealthy to pay their fair share and gives working families a fair shake. That means we have to stop rewarding profitable multinational corporations for offshoring good jobs, undermining the American middle class and hollowing out our communities,” said AFSCME President Lee Saunders. “The legislation offered by Sen. Whitehouse, Rep. Doggett and Sen. Durbin will close loopholes to bring balance back to the tax code, leveling the playing field for working people and raising revenue to invest in essential public services. President Biden has made ending these tax breaks a priority, and AFSCME is proud to stand with him and these congressional leaders as we build back better.”

“This legislation will close a huge tax loophole that incentivizes corporations to outsource American jobs and shift profits to tax havens so they avoid paying their fair share in taxes here at home,” said Frank Clemente, executive director at Americans for Tax Fairness. “A priority of our coalition is to get President Biden’s forthcoming Build Back Better jobs plan to close that loophole so that U.S. corporations pay the same higher tax rate on offshore profits that they pay on domestic profits. This will raise more than $700 billion for job-creating investments here at home.”

“The No Tax Breaks for Outsourcing Act will remove incentives to move corporate jobs and profits offshore; increase U.S. tax revenues; level the playing field for small businesses; and move us toward a fairer tax system that works for all,” said Ian Gary, executive director of the Financial Accountability and Corporate Transparency (FACT) Coalition. “The Biden Administration has made clear its intention to take on the global race to the bottom on taxes. This Act complements the Administration’s agenda on U.S. tax reform and in international tax negotiations, and will help tackle the worst of offshore corporate tax haven abuse.”

“Main Street has been hit hard by the COVID-19-related economic downturn and one way Congress should address that is by prioritizing tax changes that put domestic small businesses on a level playing field with multinational corporations,” said Susan Harley, managing director of Public Citizen’s Congress Watch division. “By closing the loophole that allows multinationals to pay half the domestic rate–or even nothing at all–on foreign-booked profits, not only would the No Tax Breaks for Outsourcing Act ensure corporations can’t game the system, it has the added benefit of removing one of the incentives companies have to outsource jobs and investments. And, by having these corporations pay more of their fair share of taxes, the U.S. could use the estimated $77 billion per year of revenues to reinvest in communities that have suffered the heaviest burdens of the pandemic.”

Other public interest groups include AfricaFocus Bulletin; Alliance for Retired Americans; American Family Voices; Americans for Democratic Action (ADA); American Sustainable Business Council; Association of Concerned Africa Scholars – USA; Campaign for America’s Future; Center for International Policy; Center for Popular Democracy; Coalition on Human Needs; Color of Change; Community Change Action; Congregation of Our Lady of Charity of the Good Shepherd, U.S. Provinces; Corporate Accountability Lab; Crude Accountability; DailyKos;; Economic Policy Institute; Fair Share; Faith Action Network; Franciscan Action Network; Friends of the Earth U.S.; Fund for Constitutional Government; Global Alliance for Tax Justice ; Global Financial Integrity; Greenpeace US; Grey Nuns of the Sacred Heart; Health Care for America Now; Indivisible; Institute for Policy Studies – Inequality Program; Institute on Taxation and Economic Policy (ITEP); Interfaith Center on Corporate Responsibility (ICCR); International Rights Advocates; Jobs With Justice; Jubilee USA; Liberty Shared; Main Street Alliance; Maryknoll Fathers and Brothers; Missionary Oblates; MomsRising; National Advocacy Center of the Sisters of the Good Shepherd; National Employment Law Project; National Organization for Women; NETWORK Lobby for Catholic Social Justice; Our Maryland; Our Revolution; Oxfam America; Patriotic Millionaires; Peace Education Center; Progressive Change Institute; Project Blueprint; Publish What You Pay – United States; Responsible Wealth; RESULTS; Rights CoLab;; Sisters of St. Francis of Philadelphia; Small Business Majority; South Carolina Small Business Chamber of Commerce; Strong Economy For All Coalition; Take on Wall Street; Tax Justice Network; Tax Justice Network USA; Tax March; United for a Fair Economy; United Church of Christ, Justice and Witness Ministries; United Methodist Church – General Board of Church and Society; US-Africa Bridge Building Project; Voices for Progress; Washington Fair Trade Coalition; Working Partnerships USA.

Labor organizations endorsing the bill include American Federation of Government Employees (AFGE); American Federation of Labor & Congress of Industrial Organizations (AFL-CIO); American Federation of State, County and Municipal Employees (AFSCME); American Federation of Teachers; Communication Workers of America (CWA); International Association of Machinists & Aerospace Workers (IAMAW); International Brotherhood of Teamsters; International Federation of Professional and Technical Engineers (IFPTE); International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW); IUE-CWA; National Education Association (NEA); Service Employees International Union (SEIU); United Steelworkers (USW); UNITE HERE; Union Veterans Council, AFL-CIO; Working America, AFL-CIO.

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 a U.S. companies and a smaller foreign firms to be a 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 multination 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.

Full text of the bill is available here.

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Meaghan McCabe, (202) 224-2921