The Republican Tax Bill Will Send More Jobs Overseas

Remember Donald Trump’s promise to keep American jobs in America? Of course you do. No longer will we tolerate American companies sending jobs offshore thanks to stupid tax laws and unfair competition. Not on Trump’s watch, anyway.

Funny thing about that. According to the Washington Post, the Republican tax bill is likely to increase the movement of jobs and profit overseas:

There are three reasons, according to nonpartisan tax experts. First, a corporation would pay that global minimum tax only on profits above a “routine” rate of return on the tangible assets — such as a factory — that it has overseas. So the more equipment a corporation has in other countries, the more tax-free income it can earn. The legislation thus offers corporations “a perverse incentive” to shift assembly lines abroad, says Steve Rosenthal of the Tax Policy Center.

Second, the Senate bill sets the “routine” return at 10 percent — far more generous than would typically be the case….As a result, a U.S. corporation that builds a $100 million plant in another country and makes a foreign profit of $20 million would pay roughly $1 million in tax versus $4 million on the same profits if earned in the United States, says Rosenthal, who has been a tax lawyer for 25 years and drafted tax legislation as a staff member for the Joint Committee on Taxation.

Finally, the minimum levy would be calculated on a global average rather than for individual countries where a corporation operates. So a U.S. multinational could lower its tax bill by shifting profits from U.S. locations to tax havens such as the Cayman Islands.

….Companies also are likely to continue to locate valuable intellectual property overseas to pay a lower rate than what they would face in the United States, likely to be around 20 percent, analysts said. “The plan does not meaningfully reduce the incentives for companies to move their operations and shift their income overseas,” [says Rebecca Kysar, a professor at Brooklyn Law School]. “You could say it will make things worse.”

Terrific. This should come as no surprise, since the tax bill is designed to appeal to rich business owners who are in favor of offshoring production if it will make them more money. Still, you have to wonder. Has Trump yet done anything that’s likely to materially improve the job prospects of working and middle-class folks? I can’t think of anything.¹

¹Demolishing environmental rules doesn’t count. That’s popular with big business, but it’s unlikely to do anything for workers.