[Congressional Record Volume 151, Number 6 (Wednesday, January 26, 2005)]
[Senate]
[Page S605]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DORGAN (for himself, Ms. Mikulski, Mr. Feingold, Mr. Kohl, 
        Mr. Harkin, Mr. Kennedy, Mr. Leahy, Mr. Levin, and Mr. 
        Johnson):
  S. 196. A bill to amend the Internal Revenue Code of 1986 to provide 
for the taxation of income of controlled foreign corporations 
attributable to imported property; to the Committee on Finance.
  Mr. DORGAN. Mr. President, today I am joined by Senator Mikulski of 
Maryland and seven of our colleagues in introducing legislation to 
repeal one of the most egregious tax subsidies found in the U.S. Tax 
Code. Believe it or not, U.S. companies that move their manufacturing 
plants and good-paying jobs overseas will be rewarded with billions of 
dollars in tax breaks over the next 10 years. Unfortunately for both 
American workers and American taxpayers, this is absolutely true. Our 
bill will repeal this wrong-headed fiscal policy that has worked 
against the interest of American manufacturers for so many years.
  Let me describe how this perverse tax subsidy works. Imagine two 
competing U.S. companies manufacturing a product for sale in this 
country. Company A has a plant with American workers. It sells its 
product here at home, immediately paying U.S. taxes on its profits. 
Company B, however, decides to shut down its U.S. plant, fire its 
American workers and build a new plant in a foreign country because it 
can produce the same goods at lower cost there, using underpaid foreign 
workers. Moreover, Company B pays almost no taxes in the foreign 
country and no taxes currently in the United States because it is 
entitled to tax ``deferral'' under our income tax laws. The Federal Tax 
Code allows firms like Company B to defer paying any U.S. income taxes 
on the earnings from those now foreign-manufactured products until 
those profits are returned, if ever, to this country.
  In other words, when United States companies close down a 
manufacturing plant such as Huffy bicycles or Radio Flyer little red 
wagons, fire their American workers and move those good-paying jobs to 
countries like China, United States tax law actually gives these 
companies a large tax break. This tax break is not available to 
American companies that make the very same products here on American 
soil. So the U.S. company that decides to stay at home suffers a 
competitive disadvantage, a disadvantage that our tax laws have helped 
to create.
  The congressional Joint Committee on Taxation says that this tax 
``deferral'' loophole will dole out some $6.5 billion in tax breaks 
over the next decade to U.S. manufacturing companies that pack up their 
operations and relocate abroad. This tax loophole likely contributed to 
a loss of some 2.7 million U.S. manufacturing jobs since 2000 and 
encouraged the creation of over 1 million new jobs in the foreign 
manufacturing affiliates of U.S companies since 1993.
  Last May, Senator Mikulski and I offered an amendment on the Senate 
floor to try to shut down this perverse $6.5 billion tax break. Our 
effort was supported by a number of organizations concerned about the 
loss of good-paying U.S. manufacturing jobs, including the 
International Union, United Automobile, Aerospace & Agricultural 
Implement Workers of America--UAW; the AFL-CIO; the International 
Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers 
and Helpers; the International Brotherhood of Electrical Workers; and 
the Union of Needletrades, Industrial and Textile Workers, UNITE.
  Regrettably, our amendment failed to get the votes it needed to pass. 
The powerful lobby for large multinational firms was able to keep this 
tax loophole fully intact. But I intend to offer this proposal again 
and again until this tax subsidy is finally repealed.
  Frankly, I strongly disagree with the majority in the Senate that 
voted to retain this ill-conceived tax break, which hurts American 
businesses and workers. By their vote, our opponents essentially said 
let's continue to give enormous tax breaks that encourage U.S. 
companies to move their operations overseas and contributes to the 
dislocation of thousands of American workers.
  The bill we are introducing today, like last year's amendment, is 
carefully targeted. It applies only to U.S. firms that move production 
overseas to low-tax countries and then turn around and import those 
products for sale here in the United States. Repealing this U.S. jobs 
export tax subsidy will not hurt the ability of U.S. firms to compete 
against foreign competitors in foreign markets.
  In the final analysis, the approach taken in our legislation is 
measured and long overdue. As we work in Congress to reform the tax 
system in the coming year and shut down a number of arcane tax 
loopholes, this one should be at the top of the list. I urge you to 
cosponsor this bill.
                                 ______