The Offshore Job Problem in Philadelphia & the Senate Solution to Create US Jobs Instead

Republicans, Democrats, Liberals, Independents, Tea party Candidates, Corporations, and especially the unemployed, all complain about Illegal aliens taking American jobs while we continue to lose ours. It is time for America to face the truth; we allowed it to happen. Heck, America amended the tax code to make it happen. What is that you ask? What do I mean?

America calls it "offshoring," which we have continually promoted since the 1960's, later offering tax amnesty in 2005, and extending tax credits to companies moving overseas. The illegal aliens I speak of? They are in China, the Philippines, India, and countless other countries that American companies offshore its jobs to, while paying those workers much less to manufacture products or perform services simply to ship them back to the US and sell them, without paying taxes on the profit.

President Obama wants these incentives stopped. The "Creating American Jobs and Ending Offshoring Act S. 3816" would incentivize companies to create US jobs instead of offshoring them. They would receive payroll incentives from September 22 2010 to September 22 2013. The act would also cease the deductibility of moving expenses and cease profit tax deferments of overseas operations.

Tax Deferment of Profits: An Example

Current law states that if US headquartered "XYZ Corporation" has a foreign subsidiary in India, that subsidiary is subjected to India's taxes, which are much less than US taxes (35 percent). XYZ then imports its foreign product to sell in the US, but because the proceeds from all US sales return to its subsidiary, XYZ defers US taxes on the profit until that profit returns to the US.

Tax Credits for Moving Costs: An Example

Again, America's tax code encourages overseas jobs by allowing XYZ to deduct moving costs as a business expense. XYZ has two US locations, and closes one of them forever. It then opens an overseas location in a lower wage/lower tax country, importing its foreign made goods to the US to sell them. Then, after deducting its moving costs, XYZ defers taxes on the profits from selling their goods; a double tax profit in the company's pocket.

Local Job Losses

In Pennsylvania, about 95,700 workers lost their jobs due to companies' offshoring to China from 2001 to 2008, according to a report by the Economic Policy Institute dated March 23 2010. In Pennsylvania's 13^th Congressional District, including my home in Northeast Philadelphia, over 5,000 people lost their jobs as a direct result of offshoring to China in the same period.

Another example includes my freelance writing. I continually bid against other freelance writers based in other countries such as India or the Philippines for writing jobs on websites such as Rent-a-Coder, ODesk, and Get-a-Coder. Using an example of a contract that I recently bid $100 on, the going US rate for that particular job, against other workers, some from the above mentioned countries, bid $10 and one even bid three dollars for the same work.

Who do you think won the contract? The three-dollar bidder, that's who. While their cost of living is lower and allows them to bid low, US citizens like me are forced to work for sub-par wages or not work at all because we will lose our jobs to offshore workers. What am I going to do, work in a different industry that pays better? Is it that simple?

Recent Offshoring

Sunoco, headquartered in Philadelphia, recently disclosed an agreement with IBM to offshore their IT, financial, accounting, indirect procurement, and transaction processing departments. However, it is still unknown how many of the 4,000 Philadelphian jobs Sunoco will cut due to the agreement, as Sunoco refuses to release that information. When Sunoco finally opens overseas, they will deduct their moving expenses on their corporate taxes and pocket profits based on services sold in the US.

Yes, this is how America stops illegal aliens from taking Phiadelphian jobs; it pays them overseas instead, while pocketing tax incentives. It is a sad, but true fact that America has been the epitome of its own hypocrisy for decades, continually helping "illegal aliens" to take Philadelphian jobs offshore for many years with no signs of stopping-until now. Let's take our local jobs back.

Sources:
David J. Lynch, "Does US Tax Code Send jobs Offshore?" USA Today
Robert E. Scott, "Unfair China Trade Cost 2.4 million Local Jobs," Economic Policy Institute
Paul McDougall, "IBM, Sunoco in Secret Outsourcing Pact," Information Week
Sam Stein, "Senate Democrats make One Last Push at Jobs Bill," The Huffington Post
Page 6 (PDF), "Supplimental Table B: Net Job Loss in Congressional Districts Due to Growing trade Deficits with China 2001-2008," EPI.org
Page 17 (PDF), "Enabling Factors and Incentives for Offshoring, Offshoring Services: An Overview of the Issues"GAO.gov