- The Washington Times - Thursday, March 4, 2004

The Senate yesterday approved a measure that would stop federal contractors from using taxpayer funds to move jobs overseas.

Sen. Christopher J. Dodd, Connecticut Democrat, attached the legislation to a bill meant to restructure corporate taxes and end rising trade sanctions on U.S. goods sold in Europe. The amendment passed 70-26.

Republicans and Democrats in Congress are using the corporate tax bill to highlight different approaches to stemming a steady loss of factory jobs and a trend toward outsourcing some service-sector jobs to foreign countries.

“Our nation’s chief export shouldn’t be jobs for foreign workers,” Mr. Dodd said.

Some Republicans said the measure could hurt U.S. companies competing overseas and damage trade relations. Critics won a concession that requires the Commerce Department to determine if the ban would cost more jobs than it saves. Defense, homeland security and intelligence contracts won exemptions.

The ban, if signed into law, would prevent government contractors from moving offshore work that had been done by federal employees, stop federal procurement of some goods and services from overseas, and require state governments to certify that federal funds they receive will not go offshore.

Sen. Charles E. Grassley, Iowa Republican and sponsor of the corporate tax bill that was amended, said measures like Mr. Dodd’s treated a “legitimate issue,” but were stalling a bill that provides immediate relief for manufacturers from European trade sanctions. The amended bill is not expected to come up for a vote until the middle of the month.

Its chances in the House are uncertain, since a corresponding piece of legislation does not mention the offshoring issue.

The 15-nation European Union on Monday hit select U.S. industries with World Trade Organization-authorized sanctions. The WTO ruled in January 2002 against a section of the U.S. tax code that gives exporters breaks on overseas sales and leases, calling them an illegal subsidy.

The European Union started the sanctions, aimed at hundreds of products, at 5 percent and plans to raise them one percentage point a month for a year, unless the subsidies are repealed.

While companies affected by the sanctions are pressuring Congress to act, election-year politics are complicating efforts to pass legislation.

The debate has become especially intense since a top economic adviser for President Bush last month said “outsourcing is just a new way of doing international trade. More things are tradable than were tradable in the past and that’s a good thing.”

The remarks angered lawmakers from both parties worried about the 2.2 million payroll jobs lost since Mr. Bush took office. The Bush-Cheney campaign is watching the job-creation numbers closely and is hopeful that the February report, due out today, will show an addition of at least 100,000 new jobs.

White-collar positions moving offshore, such as call-center operators and software engineers, and factory job losses have become especially sensitive issues as lawmakers try to comply with the WTO ruling on taxes.

The Senate bill is meant to redistribute the export subsidies, worth about $50 billion over 10 years, as a tax cut for U.S.-based manufacturers. It also helps multinational corporations lower taxes on work they do overseas.

In the House, Rep. Bill Thomas, California Republican and chairman of the House Ways and Means Committee, this week trimmed the price tag on legislation that would reform the corporate tax code and end the trade sanctions, gaining an endorsement from House leadership and increasing chances of approval.

“I applaud Bill Thomas for his innovative proposal to keep jobs here in America, and I will work with all of my colleagues to bring it to the House floor,” House Speaker J. Dennis Hastert, Illinois Republican, said in a statement.

But Democrats attacked provisions designed to help multinational corporations operating overseas.

“This is a big issue. And the fact that the Republican leadership has embraced the Thomas bill is tragic, but it also indicates there is a real difference between the two parties,” said Dan Maffei, a spokesman for House Ways and Means Committee Democrats.

Mr. Thomas floated a proposal to House leaders that would cost an estimated $4 billion over 10 years, a dramatic reduction from the $60 billion price tag in his original proposal.

Mr. Thomas’ amended proposal would cut the tax rate for U.S.-based manufacturers and businesses with less than $20 million of taxable income from 35 percent to 32 percent and shave about $30 billion from the tax bill of multinational corporations’ overseas operations, according to an outline circulated among lawmakers.

The bill also raises funds by shutting down some tax shelters, closing loopholes and tightening other rules, such as tax writeoffs on car and patent donations, the outline said.

House leaders are still working to gather the votes necessary to pass the legislation, and Mr. Hastert did not say when the bill might reach the floor.

Mr. Maffei said revenue is raised through “gimmicks” in the measure and that the $30 billion targeted toward multinational corporations would help send jobs overseas.

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