June 16, 2004

Wyden Legislation Will Target Offshore Outsourcing

Bill would eliminate tax breaks for companies that ship American jobs overseas, provide legal protection to companies loyal to American employees

Washington, DC - Companies that outsource American jobs would lose tax benefits, and outsourced service sector and technology employees would for the first time see training and income relief, under legislation introduced today by U.S. Senator Ron Wyden (D-Ore.). The "Keep American Jobs at Home Act" would eliminate tax deductions for businesses that ship American jobs overseas, provide wage insurance and training assistance for service sector workers whose jobs have been shipped overseas, and offer legal protections for companies who refuse to outsource their workforce to maximize profits. "These are some logical steps Congress can take to keep jobs from leaving the U.S. that won't damage our long-term economic outlook or our relationships with other nations," said Wyden. "Republicans and Democrats ought to be able to agree that taxpayers shouldn't subsidize the exporting of American jobs, companies shouldn't get forced into exporting those jobs out of fear of lawsuits, and workers who lose their jobs as a result of outsourcing shouldn't be denied worker training." A summary of the legislation follows. ELIMINATE TAX BREAKS FOR CORPORATE OUTSOURCING Eliminates several tax deductions for companies that outsource American jobs, including those for executive compensation and for the cost of training overseas workers related to outsourcing. Companies could also no longer defer taxes on profits gained from shipping jobs overseas. Today, the service sector accounts for more than 80 percent of total U.S. employment; as many as 500,000 of these positions have been outsourced in the past three years. TRAINING, RETRAINING AND JOB SEARCH ASSISTANCE Provides outsourced service sector workers with the same training assistance offered to manufacturing workers through the Trade Adjustment Assistance (TAA) program. Currently, Americans who have seen their service jobs in call centers, technical support, software development and other service sector industries shipped abroad are not eligible for the training, retraining and job search help offered to manufacturing workers under TAA. Displaced workers who qualify for TAA are also eligible for a tax credit to cover 75 percent of the cost of their health insurance premium. WAGE INSURANCE FOR RE-EMPLOYED DISPLACED WORKERS Offers wage assistance to outsourced service sector workers. These workers would receive as much as 50 percent of the difference between the salary paid at their outsourced job and a lower salary paid at a new job, up to a maximum of $10,000 for one year. The eligibility age for this assistance would be 40 years of age.= A McKinsey Global Research study found that only one-third of workers who lost their jobs between 1993 and 1999 found new jobs at equal or higher salaries. The remaining two-thirds matched their earlier salary, at best, or accepted a pay cut. The same study reported that for four to five percent of the savings companies get from outsourcing, they could provide wage insurance for every full-time worker whose job is shipped overseas. CORPORATE IMMUNITY FOR REFUSING TO OUTSOURCE JOBS Provides corporate immunity from stockholder lawsuits alleging financial losses due to a corporation's refusal to outsource work from the U.S. Some company officials have claimed that failing to save money and increase profits through outsourcing would open them to stockholder lawsuits. The Wyden bill is expected to be referred to the Senate Finance Committee.