Bill would end tax incentives created during first Trump administration for big multinational corporations to ship jobs and profits overseas
Washington, DC – With President Trump’s aimless 25 percent tariffs on Canada and Mexico under negotiation, Senator Sheldon Whitehouse (D-RI) and Congressman Lloyd Doggett (D-TX) today reintroduced the No Tax Breaks for Outsourcing Act, which would reverse the Trump tax law’s breaks for offshoring jobs and profits. Republicans are seeking to double down on those incentives for offshoring jobs and profits in their reconciliation bill.
The No Tax Breaks for Outsourcing Act would level the playing field for American companies by requiring multinational corporations to pay the same tax rate on profits earned abroad as they do in the United States. The Trump tax law created a special tax rate for offshore profits that is half the domestic rate. Since the law’s passage, studies have found that multinationals have increased foreign, rather than domestic investment. Extending the Trump tax law would mean maintaining this half-off rate, which is otherwise scheduled to slightly increase.
“Trump’s haphazard tariffs on Mexican and Canadian goods will raise costs for Rhode Islanders already dealing with high prices for groceries, housing, and cars, to fill up government coffers for more harmful tax breaks for billionaires and megacorporations,” said Senator Whitehouse. “We have to reverse Trump’s ‘America Last’ policies that are incentivizing companies to send American jobs and profits overseas.”
“Donald Trump’s ‘America Last’ tax policies deliver massive tax breaks to multinational corporations to outsource jobs and shift profits abroad to tax havens,” said Congressman Doggett, a senior member of the House Ways and Means Committee. “Instead of turning our backs on the U.S. economy, our bill would do more than any Trump trade war to help bring back American jobs home, recover hundreds of billions of dollars in corporate taxes rightly owed on profits, and promote even more domestic investments and economic growth. Let’s add more jobs here in America and insist that profits earned from American consumers are taxed in America, not hidden in offshore tax havens.”
The No Tax Breaks for Outsourcing Act would boost U.S. economic competitiveness by encouraging domestic investment, leveling the playing field for domestic companies, and bringing the U.S. into compliance with the global minimum tax agreement. The Joint Committee on Taxation found that large U.S. multinationals paid an average tax rate of just 7.8 percent the year after the Trump law passed, lower than their foreign competitors. They would still pay less than their competitors with a higher rate on foreign profits. Moreover, with over 140 countries moving to implement the global tax agreement, U.S. and foreign multinationals alike will be subject to the new minimum tax whether the U.S. complies or not. Failure to join, however, will mean the revenue fills foreign coffers instead of the U.S. Treasury.
The legislation is cosponsored by Senators Richard Durbin (D-IL), Chris Murphy (D-CT), Jack Reed (D-RI), Tammy Baldwin (D-WI), Elizabeth Warren (D-MA), Jeff Merkley (D-OR), Ed Markey (D-MA), Brian Schatz (D-HI), John Fetterman (D-PA), Richard Blumenthal (D-CT), Chris Van Hollen (D-MD), Ruben Gallego (D-AZ), Mazie Hirono (D-HI), Martin Heinrich (D-NM), Cory Booker (D-NJ), Tina Smith (D-MN), and Tammy Duckworth (D-IL). The bill has 121 cosponsors in the House of Representatives, a majority of the House Democratic Caucus.
“Senator Whitehouse and Congressman Doggett’s No Tax Breaks for Outsourcing Act levels the playing field for American workers by making sure corporations pay the same tax rate on profits earned abroad as they do in the United States. The tax code should stop incentivizing the exporting of jobs. Pass this bill,” said Jody Calemine, Director of Advocacy at AFL-CIO.
“UWUA is pleased to support the No Tax Breaks for Outsourcing Act. This important legislation will help protect good-paying jobs in the U.S. and encourage domestic investments,” said James Slevin, National President of Utility Workers Union of America (UWUA).
“Providing tax benefits to multi-national corporations to outsource work to other countries is not just bad tax policy; it’s bad for America. Common sense legislation like the No Tax Breaks for Outsourcing Act would finally eliminate tax loopholes that give a lower tax rate to overseas manufacturers at the expense of domestic producers and create better accountability for tax havens like the Cayman Islands. Our union commends Sen. Whitehouse and Rep. Doggett for pushing forward the kind of tax solutions that will grow the U.S. economy,” said Dave McCall, International President of the United Steelworkers (USW).
“The No Tax Breaks for Outsourcing Act is precisely the kind of legislation we need to stop the rampant outsourcing of U.S. jobs, revitalize our domestic manufacturing industry, and bring quality jobs back onto U.S. soil. The time has come to stop rewarding corporations that outsource production and ship jobs overseas, and this legislation is a vitally important step in that process,” said Brian Bryant, President of International Association of Machinists and Aerospace Workers (IAMAW).
“While billionaires push for devastating cuts to public services, they are already enjoying massive tax breaks through offshore bank accounts and sending jobs overseas,” said Lee Saunders, President of the American Federation of State, County and Municipal Employees (AFSCME). “They’ve been allowed to plunder our economy for too long. It’s time for billionaires to finally pay their fair share in taxes like the rest of us. That can start with the No Tax Breaks for Outsourcing Act, which will close loopholes that unfairly benefit corporations that take jobs away from our communities. We thank Sen. Whitehouse and Rep. Doggett for leading on this issue, and we urge Congress to stand up to billionaires and pass this legislation on behalf of working people.”
“To create an economy that actually works for middle-class families, we need a tax code that requires corporations and the ultra-rich to pay their fair share. This means our laws must finally stop rewarding profitable corporations for offshoring good jobs. We’ve had enough of billionaires influencing our economy for their benefit. An economy where working people finally have real economic opportunity, and dignity does not come out of thin air. Sen. Whitehouse and Rep. Doggett’s No Tax Breaks for Outsourcing Act is a significant step in that direction. We wholeheartedly support it and challenge any lawmaker, of either party, who truly stands with working families to do the same,” said Randi Weingarten, President of the American Federation of Teachers (AFT).
“For years, our tax code has unfairly incentivized corporations to send jobs and money overseas, while corporate America continues to prioritize wealthy shareholders over the fair treatment of workers. Our union has experienced offshoring firsthand and has seen how it devastates families and communities. We applaud Rep. Doggett, Sen. Whitehouse, and their many co-sponsors for introducing the No Tax Breaks for Outsourcing Act and for standing up for an economy that works for everyone, not just the wealthy few. It’s time for Congress to close these outrageous loopholes that incentivize sending jobs and money out of the country,” said Dan Mauer, Director of Government Affairs at the Communications Workers of America (CWA).
“When major U.S. corporations pack up their factories and send jobs overseas, it is American communities that pay the price,” said Ian Gary, Executive Director of the Financial Accountability and Corporate Transparency (FACT) Coalition. “Lawmakers of both parties agree that supporting U.S. manufacturing and jobs is important, but for too long major elements of the tax code have done just the opposite. The No Tax Breaks for Outsourcing Act represents a vital first step to fixing our ‘America-last’ corporate tax code, all while raising much-needed revenue for popular domestic priorities.”
“ATF applauds Rep. Doggett’s effort to repeal one of the most egregious elements of the Trump tax scam. We must eliminate corporate offshore tax incentives that reward companies for eliminating good American jobs. This legislation would keep good-paying jobs stateside, grow the economy, and generate more revenue for crucial public investments,” said David Kass, Executive Director of Americans for Tax Fairness (ATF). “Profits from American consumers should be taxed domestically, not hidden in offshore havens to enrich wealthy executives and shareholders. Despite his rhetoric, Trump has consistently created offshoring incentives that enable his wealthy donors to ship U.S. jobs overseas. This bill ends these disastrous corporate tax giveaways and restores domestic jobs.”
“Behind closed doors, the billionaires running this Administration are about to introduce more tax breaks to ship jobs overseas. This is the exact opposite of what voters want.” said Porter McConnell, Senior Director of the Take on Wall Street project at Americans for Financial Reform. “Senator Whitehouse and Representative Doggett’s No Tax Breaks for Outsourcing Act would stop forcing the rest of us to subsidize multinational corporations to avoid paying their fair share and to make life harder for working families.”
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. The bill 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 law exempts from tax a 10 percent return on tangible investments made overseas, like plants and equipment. The legislation would eliminate the zero-tax rate on certain investments made overseas.
- 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 actually American companies in disguise. The bill would treat corporations worth $50 million or more and managed and controlled within the U.S. as the American 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 provisionwould discourage corporations from renouncing their U.S. citizenship. It would deem certain mergers between a U.S. company and a smaller foreign firm to be a U.S. taxpayer, no matter where in the world the new company claims 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.
- 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 U.S. subsidiaries. The bill 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.”
- Eliminating tax break for foreign oil and gas extraction income. Oil and gas extraction income earned abroad gets an even further break on the already half-off rate other industries pay on offshore profits.
Full text of the bill is available here.
