... than can be addressed by simply closing a "tax loophole". The so-called "loophole" works like this:

American companies do not pay the 35% U.S. corporate tax rate on foreign income when that money remains invested overseas. So, if a company has an overseas subsidiary, it simply leaves income earned by that subsidiary in the foreign county and certifies to its accountants that the money is invested overseas. It never remits the money to the parent and so the parent company never pays U.S. federal income tax on those earnings. This is referred to as "unrepatriated earnings".

Leaving the money overseas, of course, means that the company can continue to employ people in the foreign subsidiary (that is, can continue "outsourcing" those jobs).

Presumably, "closing" the loophole would mean modifiying the tax laws to tax the foreign income of American companies even if the money remains invested overseas.

In and of itself, this will not necessarily eliminate the "outsourcing" of jobs. There are many other economic factors involved in a decision to create a foreign subsidiary, all of which equate to lower costs of doing business (wages, local taxes, insurance costs, lower land cost or rent, etc.). I suspect that, for many companies, the tax situation is a relatively small part of the overall financial picture -- small enough that it would still be cheaper to simply pay the tax increase and continue doing business overseas (and thus, continue "outsourcing" the jobs).

Even if the result is to drive the American company out of the foreign country, that doesn't guarantee that American jobs will be created. A quite likely outcome would be that the American company would simply shut down its foreign operation and begin purchasing the goods and services it needs from some other foreign corporation.

Furthermore, eliminating that tax loophole would do nothing to discourage individuals with capital from simply founding foreign companies which are not subsidiaries of American companies. Such foreign corporations have no American tax obligation at all, so cannot be effected by changes in the U.S. tax laws.

The idea that our government should "penalize" companies which seek to increase their profits by reducing their costs strikes me as being decidedly anti-American. I thought this was supposed to be a free country.

Then there's always the "rule of unintended consequences". Other countries which view changes in our tax policies as detrimental to their economies or punitive of American companies which do business overseas may retaliate by enacting comparable laws which restrict the investment of capital and/or creation of jobs in the U.S. by their companies. Inasmuch as the job creation situation is a virtual standoff, I see no point in changing the existing policy at this time.

----- jim o\-S