"Republicans fought to protect tax loopholes for corporations that send our jobs overseas."
SEIU on Wednesday, September 7th, 2011 in a political mailing
Did Republicans oppose closing corporate tax loopholes for outsourcing?
Republicans support tax breaks for corporations that send jobs overseas, says a political mailer from Service Employees International Union, or SEIU, a union that represents service workers.
"Republicans in Congress aren't getting the message," the mailer says. "Unemployment is hurting everyone in our economy, and we need to bring jobs back to America. But rather than fighting to create jobs for the middle class, Republicans in Congress fought to protect unfair tax breaks for big special interest groups and companies that ship American jobs overseas."
"Tell Republicans in Congress: It's time to bring back jobs to America," the mailer concludes.
We wondered what SEIU's claim was based on. Obviously, there's no official tax break for shipping job overseas.
Still, the claim is becoming a common one among Democrats. So we thought it would be useful to review some of the more specific claims we've already fact-checked here, before making a ruling on SEIU's broad claim.
Deductions for business costs. Some Democrats are steamed that businesses closing U.S. operations can deduct the closing costs as standard business expenses. "The law, right now, permits companies that close down American factories and offices and move those jobs overseas to take a tax deduction for the costs associated with moving the jobs to China or India or wherever," said Sen. Sheldon Whitehouse, D-R.I., last year.
PolitiFact Rhode Island delved into Whitehouse's statement in some detail and ruled his statement True. In general, businesses can deduct any costs they face in the course of doing business. And the costs of shuttering a factory in the United States are not exempt.
Whitehouse supported legislation to change that by disallowing exemptions associated with offshoring, which an official summary defines as "any transaction in which a taxpayer reduces or eliminates the operation of a trade or business in connection with the start-up or expansion of such trade or business outside the United States." The bill failed in the Senate because it couldn't get the 60 votes required to cut off the threat of filibuster and move the bill toward final passage. The bill failed on a 53-45 vote, largely along party lines, with Democrats voting for it and Republicans voting against it.
Rule changes for foreign profits. President Barack Obama has charged Republicans with fighting for tax breaks for companies that outsource jobs. In 2010, Obama signed a bill into law that provided economic aid to states. So that the bill didn't add to the deficit, it also changed rules on foreign profits for companies.
In a speech last year, Obama said called the old rules "loopholes" that "actually rewarded corporations for shipping jobs and profits overseas."
"Even a lot of America's biggest corporations agreed that this loophole didn't make sense, agreed that it needed to be closed, agreed that it wasn't fair," Obama said in a speech. Obama said that John Boehner, then the Republican leader and now the Speaker of the House, "wants to reopen this loophole."
It's a bit complicated to explain these tax loopholes, so bear with us. Basically, the United States government taxes companies on foreign profits, which not all countries do. But companies don't have to pay taxes on foreign profits until they bring the profits back to this country. So companies tend to keep the money with their foreign subsidiaries as long as possible. But companies also get U.S. tax credits for taxes they pay to foreign governments. Some companies figured out how to game the system by keeping their profits overseas while still claiming a tax credit for taxes paid to foreign governments. The new rules say companies can't claim the foreign tax credit until bring the profits back to the United States.
The tax experts we interviewed said the old situation was definitely a loophole. But they didn't see it as a loophole particularly connected to outsourcing. And while Boehner did oppose the new rules, his position was that any increased tax burden on American companies would make them less competitive against their foreign rivals.
We rated Obama's statement Half True. He's was right that Boehner opposed changing the rules, but there wasn't a direct connection to outsourced jobs.
Overall Republican opposition to tax increases. Finally, some Democrats have seized on the fact that most Republicans oppose any and all tax increases, period. That means they're in favor of any current tax loopholes for offshoring corporations, according to this line of reasoning.
That was the basis for a political attack in last fall's congressional race in Virginia's 5th District. Democrat Tom Periello, the incumbent, said Republican challenger Robert Hurt "supports the tax loopholes that send American jobs overseas." The basis for his claim was that Hurt had signed the "Taxpayer Protection Pledge," a famous no-taxes pledge from Grover Norquist and his group Americans for Tax Reform.
We rated Periello's statement False. The pledge says that tax changes are okay as long as they result in no net tax increases. And it doesn't mention offshoring of jobs. Hurt won the election.
The SEIU's position
The SEIU referred us to the rules changes for foreign profits to back up its claim, the same charge that Obama made last year. Multinational companies are sending jobs overseas, and Republicans opposed tightening the tax rules on those multinationals, said Jennifer Farmer, SEIU's deputy communications director.
"We continue to stand by our earlier comments: In the midst of tough economic times, when lawmakers should be working together to create quality jobs and find a way out of our country’s deepening recession, Republicans in Congress have focused on the wrong priorities. They have focused on protecting big oil and tax breaks for the rich. This was true when we included the message on our mail piece. It remains true today," Farmer said.
We went back and reviewed the vote on tightening tax rules on foreign profits. At the time, Democrats controlled the Congress, and the measure passed with the support of two moderate Republican senators, Sen. Olympia Snowe and Sen. Susan Collins, both of Maine.
We should also reiterate that the experts we spoke with warned us that there's no direct connection between outsourcing and taxes on foreign profits. In 2010, shortly after the law passed, Lawrence Lokken of the University of Florida warned us that experts disagree about the effects of international tax rules on job creation. "Whether the current system encourages companies to move jobs offshore, and whether these fixes will discourage companies from doing so, are hotly debated issues. You can find entirely respectable opinion on each side of the issues," he said.
The SEIU is correct that Republicans did fight against Democratic plans to close tax loopholes on multinational corporations. But whether the corporations who took advantage of the tax loopholes were also outsourcing jobs is an unanswered question. The link between the multinationals' tax status and their outsourcing of jobs is not direct, and that's an important distinction. We rate the mailer's claim Half True.