Tax Bill Could Create Outsourcing Incentives, Senate Dems Say

December 15, 2017

President Donald J. Trump
The White House
1600 Pennsylvania Ave. NW
Washington, D.C. 20500

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 arc reflected in the positions Treasury takes in negotiations over the international components of the tax legislation with Republicans in Congress.

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 U.S. 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.² 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:

We urge you to 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,

Robert P. Casey Jr.
United States Senator

Sherrod Brown
United States Senator

Debbie Stabenow
United States Senator

Robert Menendez
United States Senator

Claire McCaskill
United States Senator

cc:
The Honorable Robert Lighthizer, United States Trade Representative

The Honorable Steven Mnuchin, Secretary, Unites States Treasury Peter Navarro, Director, White House National Trade Council