The Senate will vote Tuesday on cloture on S. 3816, the bill that permanently increases taxes on companies with foreign operations in order to provide temporary tax breaks to other companies. The title is painfully, purposely misleading. Calling S. 3816 the Creating American Jobs and Ending Offshoring Act is like calling a bill to eliminate secret-balloting in union elections the Employee Free Choice Act.
Sen. Jon Kyl (R-AZ) spoke on the Senate floor today, shining light on the misleading claims of the bill’s supporters. His prepared remarks provided a substantive rebuttal to the populist slogans that unfortunately pass for argument these days.
Outsourcing hurts U.S. employment, right? No, Sen. Kyl explained:
A few years ago, PepsiCo embarked on an aggressive expansion program in Eastern Europe, largely by buying up existing bottlers and snack chip producers, upgrading plants and equipment, and improving distribution while increasing their marketing efforts in these countries, achieving large gains in sales as a result.
As a result of this expansion, PepsiCo’s employment abroad increased, but that did not cost any Americans their jobs. Pepsi merely took over existing plants and their workers.
In fact, PepsiCo’s foreign expansion created jobs here in the United States. To support their overseas operations, the company needed to expand their logistics, marketing, and other support operations-all well-paying jobs at their U.S. headquarters. As a result, expanding operations abroad increased employment here in the United States.
Oh, c’mon, Senator. It’s just greed, greedy corporations. Isn’t it?
Many American companies establish operations abroad, not “to export jobs” for reasons of “greed,” as some of the bill’s supporters charge, but to break into foreign markets, add new customers, or cater to a larger market abroad. The Pepsi example I just discussed illustrates this point.
According to the Department of Commerce, only 10 percent of foreign subsidiary sales are into the United States. So, 90 percent of the subsidiaries’ sales are in foreign markets. This statistic shows that the vast majority of companies are not moving manufacturing overseas only to sell goods back to the United States at a savings, but rather to cater to their customers.
The Senator concluded by making an argument for a more jobs-friendly tax environment generally, one that permits U.S. companies to compete more effectively. The National Association of Manufacturers agrees.
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