> any money paid by a U.S. company or taxpayer to a foreign person whose work benefits U.S. consumers.
How on earth is this going to defined and enforced? Isn't anything and everything shipped from overseas to the US, physically or electronically, "benefiting US consumers"?
The term 'outsourcing payment' means any premium, fee, royalty, service charge, or other payment made —
“(A) in the course of a trade or business,
“(B) to a foreign person, and
“(C) with respect to labor or services the benefit of which is directed, directly or indirectly, to consumers located in the United States.
...
(c) FOREIGN PERSON. — For purposes of this section, the term 'foreign person' means any person who is not a United States person, except that such term shall not include any corporation or partnership which is organized under the laws of a possession of the United States.
Note that goods are excluded, which is the only sliver of sanity in this whole thing, although it's also a loophole big enough to drive a truck through: if I get my favorite Indian outsourcing company to build me a Web app and ship it by USB drive, did I just avoid the tax?
In any case, enforcement will be by requiring everybody who files tax returns to self-report under threat of perjury:
c) REPORTING. — The Secretary of the Treasury, or the Secretary's delegate, may —
(1) require United States persons making payments to foreign persons (as defined in section 5000E of the Internal Revenue Code of 1986, as added by subsection (a)) to file a return of tax under section 5000E of such Code or to file an information return concerning such payments, which may include —
(A) information on whether such payments are outsourcing payments (as defined in section 5000E of such Code), and
(B) such other information concerning such payment as the Secretary may reasonably require to enforce the amendments made by this section, and
(2) require the officers of any corporation to certify on such return, under penalty of perjury, the character of such payments.
- 25% is not enough to matter if you drop from 130k US engineer to a 40-50k outsourced
- International corporation will easily side step that since the US Corp is not paying for salaries to the foreign Corp, just dues to exploit the IP at best
So at best this would be hurtful to smaller businesses like the stupid section 174.
the realistic best you can do for a quality outsourced engineer is $80k. Good ones go for $100k, and you can easily, easily get junior devs for that price. You can even get decent U.S. engineers for $125k outside of HCOL places.
So this only applies to American companies? So I’d a German company decides to use Indian labor to do something for US consumers, they avoid the tax, but Facebook or Google would pay it. Since these companies also have international markets for their products, how would Apple figure out how much of their iPhone work is for US consumers and how much isn’t?
We have some devs in other countries. We pay them about $80K/yr. We have been trying to hire locally. The positions have been advertised for about 6 months at $140K/yr. We have only had unqualified people apply so far. We then bumped the salary to $160K. Still no go.
Again, we get takers, but they can't match the skill level of overseas devs at double the salary.
Will we pay the 20% tax/fine? Grudgingly yes. Particularly if this stuff becomes law and local labor force becomes even more expensive than it is now.
I can also see people coming up with creative ways to circumvent having to pay the tax. It is possible that some companies will move out entirely or create a legally separate entity offshore that is responsible for all the work that they wish to outsource.
The same sort of thing happened with manufacturing jobs. You can wish for those jobs to come back all you want. It is not happening in any significant numbers.
Let me guess the candidate has to agree to live in one of the most expensive cities on the planet and dodge knife wielding homeless people and their feces on the way to work every day.
>Will we pay the 20% tax/fine? Grudgingly yes. Particularly if this stuff becomes law and local labor force becomes even more expensive than it is now.
This is the point. They could just BAN outsourcing. But letting it just be more expensive is a compromise to allow companies to find people when overseas is the only way to do it.
>The same sort of thing happened with manufacturing jobs. You can wish for those jobs to come back all you want. It is not happening in any significant numbers.
If the tariffs stick, and get set to a sufficiently high rate, then the jobs will come back. In the meantime, investors are scared to be screwed over on new factories in the US which would be uncompetitive without tariffs.
More and more parallels to Peronist econ are emerging in the US. All that is missing is a rationalization of taxes on exports. Both sides of the aisle seem opposed to laissez-faire liberalism.
I think there could be a case for a fixed amount of annual tax credit for each US citizen that is employed by a company - since presumably that person is not on the government payroll or on benefits so the US government is saving money.
The big plus is business owners love claiming tax credits. You would not really need that much paperwork or auditing as far as I can tell since you have every US employees tax info already versus trying to monitor/regulate "outsourcing".
An "outsourcing payment" is defined as "any premium, fee, royalty, service charge, or other payment made...to a foreign person...to labor or services the benefit of which is directed, directly or indirectly, to consumers located in the United States."
That exempts B2B. It doesn't have a border-adjustment charge, so any country tariffed less than 25% can undercut American businesses. And it weirdly doesn't use the words wage, employee or employer, which would mean a lot of consumer purchases would be covered, from airline tickets to Spotify charges.
The core questions are: Why does a company want to be a US company and why would companies want to hire US employees? With those two lenses in place does this help? The first one is a clear 'no', this makes companies not want to be US companies. For the second one it does give some reason but as others have pointed out, giving incentives and not penalties is generally a better way to do things since that doesn't remove a company's incentive to be a US company and gives them a reason to want to hire local. Similarly, ensuring the workforce is capable and competitive would be a better response because those give clear 'yes' answers to the two questions. Maybe invest in education instead of driving companies away with penalties? Nah. That's crazy.
I'm not a lawyer, but doesn't it applies to services you buy too? Like of, god forbid, a US company pay for SAP, it'll be 25% too? or if you pay for spotify when apple Music exist, it'll be a 25% surcharge?
23 comments
[ 1.5 ms ] story [ 68.0 ms ] threadHow on earth is this going to defined and enforced? Isn't anything and everything shipped from overseas to the US, physically or electronically, "benefiting US consumers"?
Update: Here's the full text of the bill.
https://www.taxnotes.com/research/federal/legislative-docume...
And the definition is:
The term 'outsourcing payment' means any premium, fee, royalty, service charge, or other payment made —
“(A) in the course of a trade or business,
“(B) to a foreign person, and
“(C) with respect to labor or services the benefit of which is directed, directly or indirectly, to consumers located in the United States.
...
(c) FOREIGN PERSON. — For purposes of this section, the term 'foreign person' means any person who is not a United States person, except that such term shall not include any corporation or partnership which is organized under the laws of a possession of the United States.
Note that goods are excluded, which is the only sliver of sanity in this whole thing, although it's also a loophole big enough to drive a truck through: if I get my favorite Indian outsourcing company to build me a Web app and ship it by USB drive, did I just avoid the tax?
In any case, enforcement will be by requiring everybody who files tax returns to self-report under threat of perjury:
c) REPORTING. — The Secretary of the Treasury, or the Secretary's delegate, may —
(1) require United States persons making payments to foreign persons (as defined in section 5000E of the Internal Revenue Code of 1986, as added by subsection (a)) to file a return of tax under section 5000E of such Code or to file an information return concerning such payments, which may include —
(A) information on whether such payments are outsourcing payments (as defined in section 5000E of such Code), and
(B) such other information concerning such payment as the Secretary may reasonably require to enforce the amendments made by this section, and
(2) require the officers of any corporation to certify on such return, under penalty of perjury, the character of such payments.
- 25% is not enough to matter if you drop from 130k US engineer to a 40-50k outsourced
- International corporation will easily side step that since the US Corp is not paying for salaries to the foreign Corp, just dues to exploit the IP at best
So at best this would be hurtful to smaller businesses like the stupid section 174.
Again, we get takers, but they can't match the skill level of overseas devs at double the salary.
Will we pay the 20% tax/fine? Grudgingly yes. Particularly if this stuff becomes law and local labor force becomes even more expensive than it is now.
I can also see people coming up with creative ways to circumvent having to pay the tax. It is possible that some companies will move out entirely or create a legally separate entity offshore that is responsible for all the work that they wish to outsource.
The same sort of thing happened with manufacturing jobs. You can wish for those jobs to come back all you want. It is not happening in any significant numbers.
This is the point. They could just BAN outsourcing. But letting it just be more expensive is a compromise to allow companies to find people when overseas is the only way to do it.
>The same sort of thing happened with manufacturing jobs. You can wish for those jobs to come back all you want. It is not happening in any significant numbers.
If the tariffs stick, and get set to a sufficiently high rate, then the jobs will come back. In the meantime, investors are scared to be screwed over on new factories in the US which would be uncompetitive without tariffs.
The big plus is business owners love claiming tax credits. You would not really need that much paperwork or auditing as far as I can tell since you have every US employees tax info already versus trying to monitor/regulate "outsourcing".
An "outsourcing payment" is defined as "any premium, fee, royalty, service charge, or other payment made...to a foreign person...to labor or services the benefit of which is directed, directly or indirectly, to consumers located in the United States."
That exempts B2B. It doesn't have a border-adjustment charge, so any country tariffed less than 25% can undercut American businesses. And it weirdly doesn't use the words wage, employee or employer, which would mean a lot of consumer purchases would be covered, from airline tickets to Spotify charges.
Like a tariff, but on services?