[Congressional Record Volume 153, Number 72 (Thursday, May 3, 2007)]
[Senate]
[Page S5571]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DORGAN (for himself, Ms. Mikulski, Mr. Durbin, Ms. 
        Stabenow, Mr. Rockefeller, Mr. Levin, Mrs. Feinstein, Mr. 
        Johnson, Mr. Harkin, Mr. Feingold, Mr. Leahy, Mr. Kohl, and Mr. 
        Kennedy):
  S. 1284. 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 Senators Mikulski, 
Durbin, Stabenow, Rockefeller, Levin, Feinstein, Johnson, Harkin, 
Feingold, Leahy, Kohl, and Kennedy in introducing legislation to close 
an insidious loophole in the U.S. Tax Code that actually rewards U.S. 
companies that move American manufacturing jobs overseas. Some may 
think this is a belated April Fools' Day joke; regrettably, it is not. 
Let me explain how this perverse tax break for these companies works.
  When a U.S. company closes down a U.S. manufacturing plant, fires its 
American workers, and moves those good-paying jobs to China or other 
locations abroad, U.S. tax laws allow these firms 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. 
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. Multinational 
companies ought to pay the same taxes that domestic companies pay. At a 
minimum, U.S. companies that keep their jobs here should not be put at 
a competitive disadvantage by Federal tax policy.
  The notion that granting large tax breaks to companies that move 
their manufacturing operations offshore is good for this country is 
utter nonsense. Among other things, those who support this half-cocked 
fiscal policy claim that shutting down U.S. manufacturing operations 
and moving them abroad will result in more U.S. jobs and increase our 
exports.
  However, this assertion is not supported by the facts. According to 
the latest available data, the number of foreign manufacturing 
affiliates has grown from 7,420 to 8,490, up some 14 percent since 
1993. From 1993 though 2004, U.S. companies moved 1 million 
manufacturing jobs offshore to their foreign affiliates.
  Throughout this entire period, this perverse deferral break has been 
in effect. Has it resulted in new U.S. manufacturing jobs? No. We have 
lost some 3.2 million U.S. manufacturing jobs since 2000 alone. Has 
this misguided tax subsidy resulted in higher exports from U.S. 
companies to their foreign affiliates as the proponents of this tax 
subsidy suggest? No. In fact, imports into the United States from the 
foreign subsidiaries of U.S. companies more than doubled from $92 
billion in 1993 to $203 billion in 2004. And the balance of trade with 
foreign affiliates of U.S. firms plummeted to a $72 billion deficit in 
2004 as compared to $3.4 billion in 1997.
  I have been working to end this wrong-headed Federal tax break for 
many years. Senator Mikulski and I have forced the Senate to vote to 
repeal this tax subsidy several times. I have described stories on the 
Senate floor about a number of American companies that have moved 
production overseas, companies like Huffy bicycles and Radio Flyer 
little red wagons to China; Samsonite, which went to Mexico and then 
China; Levi's, which are now made all over the world, everywhere except 
in the very country that invented them; Maytag, which now makes 
appliances in Mexico and Korea; and Fruit of the Loom, which moved to 
Mexico. And I would point out, once again, that this tax deferral break 
given to companies like Radio Flyer or formerly to Huffy bicycles is 
not available to American companies that make the very same products on 
U.S. main streets.
  But we have run into stiff opposition from many U.S. multinational 
companies, their lobbyists, and some policymakers who claim our 
proposal would impede the ability of U.S. firms to compete and grow in 
the global economy. That is hogwash. This proposal does nothing to 
hinder U.S. multinationals that produce abroad from competing with 
foreign firms in foreign markets. The legislation we are introducing 
today is carefully targeted; it ends the deferral tax break only where 
U.S. multinationals produce goods abroad and ship those products back 
to the U.S. market. In more technical language, this legislation would 
end tax deferral for the ``imported property'' income of controlled 
foreign corporations. The proposal also adds a new separate foreign tax 
credit basket for imported property income. The separate foreign tax 
credit basket is an anti-abuse provision that will stop U.S. 
multinational companies from using the foreign tax credit to shelter 
profits generated in a tax haven country by preventing the cross-
crediting of high foreign taxes on general income against the U.S. tax 
on imported property income that is subject to low foreign taxes.
  The tax experts with the Joint Committee on Taxation estimate that 
this pernicious tax break will costs U.S. taxpayers some $15.5 billion 
over the next decade. It is no wonder that the powerful lobby for the 
largest U.S. multinational firms has fought to keep this tax loophole 
fully intact. But as I have told my colleagues on the Senate floor a 
number of times, I intend to offer this proposal again and again until 
this tax subsidy is finally repealed.
  I understand that some U.S. companies will still choose, with or 
without this tax subsidy, to dislocate thousands of workers in America 
in search of cheaper labor, lax regulation, and greater profits abroad 
at whatever the cost. They will be free to do so. But at least U.S. 
taxpayers will not be asked to provide billions of dollars in tax 
subsidies for those who do.
  I urge all of my colleagues in the Senate, Democrats and Republicans 
alike, to take a fresh look at this issue and help us do what Congress 
should have done many years ago; that is, repeal this ill-conceived tax 
break once and for all.
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