need a quick explanation - how Bush uses tax code to encourage outsourcing

[NewJeffCT]

How is the tax code used now to encourage outsourcing? I'm usually pretty good at this stuff, but I just fumbled at coming up with a short explanation. Can somebody help me out?

Thanks

[farmbo]

1. Costs of training foreign workers, travel, capital asset acquisition...

...are all business deductions against income of turn-coat companies. Companies no longer have to pay the employer's contribution to various payroll taxes.

[Robert Oak]

2. Foreign income isn't taxed at US 35% (domestic corporate rate)

plus US corporations don't have to pay into FICA, workman's comp, etc.
by hiring slave labor in foreign nations. Also, healthcare is often
taken care of by the state or national or non-existence, so that's an additional savings gotten by offshore outsourcing.

They can also bring in the finished product as an import and avoid
any taxes as profits as a US domestic product.

they can also keep the profits in the foreign country so it never gets taxed at (US domestic tax rate - foreign corporate tax rate) which is the net difference when you bring in the money from overseas operations.


http://www.interesting-people.org/archives/interesting-people/200403/msg00121.html

(also factcheck.org is wrong on multiple counts, one of them being
inaccurately reporting the number of offshored outsourced jobs...
this year alone, > 400k and often they are Masters degreed professional jobs).

[AP]

4. For individuals, your worldwide income is taxable. For Corps, you can form

a subsidiary HQ'd overseas and their income isn't taxed until it's realized in the US. So you license your trademarks to a Bermuda company for a nominal fee. The Bermuda company gets all the licensing revenue. The Bermuda companies pays its income out as dividends to it's US-based owners. The owners only pay 15% rates on that income.

Is this right?

[Robert Oak]

5. up to 75k for individuals exempt from US tax if abroad

state too...

only CA...if you come back before 2 years they will claim it's temporary and try to tax you for those 2 years @ 10%. Really sucks.

[AP]

9. I think the exemption is over 80K now. It increases every year.

It might be as high as 85K.

You still pay local income taxes. Over 85K (?) you have to claim a credit for foreign taxes that you pay.

[AP]

10. Incidentally, if you don't work abroad -- if you work in the US -- there's

no foreign earned income credit, which was my original point.

Individuals living in the US pay US income tax on their worldwide income. Corporations don't. Or, corporations can easily avoid paying taxes on overseas income.

[Cocoa]

7. factcheck.org is especially bad on trade

bad overall, but on trade they simply take sides and call it factchecking. They take the pro-free-trade side.

[FloridaPat]

3. Health care and payroll taxes - they save a bundle. But that would

encourage any contractors. The move in the last few decades has been to outsource to contractors and consulting companies. It's on the books differently, no retirement, no benefits, and no lawsuits when you throw people out. Now outsourcing isn't bad unless it's out-sourced out of the country.

As for the books, employees are liabilities. Contractors are assets until project are done, then they are expenses. Looks better on the bottom line.

[Robert Oak]

6. no UI, no liability insurance, productivity artificially inflates

Productivity is GDP/(# of workers) (simply equation) so if you outsource everything it looks like you have no workers and productivity soars.

[FloridaPat]

8. Thank you. I've been wondering about that and asking for years

and never got an answer. So much for the computer being the big productivity engine the last 4 years.