[Congressional Record Volume 141, Number 1 (Wednesday, January 4, 1995)]
[Extensions of Remarks]
[Page E23]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                   FOREIGN SUBSIDIARY TAX EQUITY ACT

                                 ______


                      HON. JAMES A. TRAFICANT, JR.

                                of ohio

                    in the house of representatives

                       Wednesday, January 4, 1995
  Mr. TRAFICANT. Mr. Speaker, last year I introduced H.R. 1374, the 
Foreign Subsidiary Tax Equity Act, to discourage domestic corporations 
from establishing foreign manufacturing subsidiaries in order to avoid 
Federal taxes. Today, I am reintroducing this bill. American 
manufacturers for too long have abused the good faith of the American 
workers by developing manufacturing processes in this country before 
moving production facilities overseas and handing out pink slips back 
home. Despite the fact that America possesses the most productive and 
talented labor force in the world, many United States manufacturers, 
lured by cheap labor costs and tax holidays, have closed down plants 
and moved operations to countries like Mexico, Taiwan, and South Korea.
  Under my bill, foreign subsidiaries of U.S. companies that ship a 
significant portion of their products into the United States would be 
taxed as if that subsidiary were located in the United States. Simply, 
the intent of my bill is to discourage tax-motivated foreign investment 
while protecting the jobs of your constituents.
  Mr. Speaker, my bill is similar to legislation proposed by President 
Nixon in 1973, but the issue has been controversial since the inception 
of the corporate income tax in 1909. In 1962, President John F. Kennedy 
proposed repeal the deferral of overseas investment in developed 
countries, but Congress did nothing.
  My bill would forbid foreign subsidiaries of U.S. companies from 
relocating manufacturing jobs in countries that provide tax holidays 
and other tax breaks and shipping a significant portion of their 
products into the United States. A current tax loophole allows these 
companies to avoid being taxed as if that subsidiary were located in 
the United States.
  Mr. Speaker, in addition to losing millions of dollars in income 
taxes due to this anomaly in our tax code, the United States is losing 
a major portion of its manufacturing base. Once the manufacturing base 
is gone, it will be very difficult to get back. Germany and Japan have 
clearly taken the lead in maintaining a strong and viable manufacturing 
sector as their economies have continued to outperform ours. Overall, 
maintaining a productive manufacturing base is the lifeline to a 
modern, high income, competitive economy.
  I have always believed the root of America's social decay is the ill 
advised trade and tax policies Congress has advocated for the past 25 
years. Mr. Speaker, I urge all members to take a closer look at the 
problem of runaway manufacturing plants and co-sponsor this important 
legislation. My bill would be the first step in putting an end to this 
practice and make these companies pay their fair share.


                          ____________________