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Kerry reveals plan to keep jobs in US
(Agencies)
Updated: 2004-03-27 09:00
Democratic presidential candidate John Kerry on Friday unveiled his plan to deal with "Benedict Arnold" companies that he has repeatedly criticized during the campaign for reaping tax benefits while shipping U.S. jobs overseas.
But his proposal to end an estimated $12 billion annually in corporate tax relief is certain to stir stiff opposition from some of America's largest multinational companies who are currently enjoying those breaks. And private economists questioned whether it would do much to halt the hemorrhaging of manufacturing jobs to foreign countries.
Speaking at Wayne State University in Detroit, Kerry said his corporate tax proposal was part of a comprehensive economic plan he will put forward in coming weeks to create 10 million jobs during the first four years of a Kerry administration.
The jobs pledge — and the corporate tax changes — were designed to highlight economic issues where polls consistently have shown President Bush is vulnerable: an economic recovery where job growth has lagged badly, the loss of more than 3 million manufacturing jobs — one in six — since mid-2000 and rising anxiety among white-collar workers about the increased "outsourcing" of service jobs to foreign countries.
"I won't tell you that we can bring back every lost industry or protect every current job," Kerry said. "But my plan will enable our economy to create jobs and keep more good jobs here in America."
While staking out a position in the fierce debate over outsourcing, Kerry also proposed to reduce the corporate tax rate, a reflection of his effort to cast himself as a pro-business Democrat in the mold of the last president from his political party — Bill Clinton.
Kerry even acknowledged how his outreach to the corporate world could be considered anathema among hard-core Democrats.
"Some may be surprised to hear a Democrat calling for lower corporate tax rates," Kerry said. "The fact is, I don't care about the old debates. I care about getting the job done and creating jobs here in the United States of America."
Kerry's proposal would largely eliminate the tax break that allows companies with foreign operations to defer tax payments on income earned abroad until that revenue is brought back to the United States, a period that can stretch for years.
Kerry would require U.S. companies to pay taxes on that income in the year that it is earned, ending a tax break that the Kerry campaign estimated costs the U.S. Treasury $12 billion annually. That money would be used to lower the corporate tax rate to 33.25 percent from the current 35 percent.
Private economists said they favored reducing the corporate tax rate as a way to spur the economy, but they questioned how many jobs would be kept in the United States by halting the deferral of taxes on income earned overseas.
"The tax deferral is a very minor reason for why companies move jobs overseas," said David Wyss, chief economist at Standard & Poor's in New York.
Economists said many factors including lower wages and the desire to sell into a foreign markets go into a decision to set up foreign operations.
One complicating factor is that Kerry's proposal would allow companies to retain the tax deferral break if the foreign operation is focused strictly on the foreign market — such as a manufacturing plant making goods for sale in the foreign country rather than for export back to the United States.
Kerry aides estimated this exclusion would cover only 25 percent of deferred taxes and they said they would make up that lost revenue by closing certain loopholes investors use to shelter earnings in foreign tax havens.
Republicans complained that the exclusion for certain foreign earnings would complicate an already complex tax code.
"The Kerry package is simply a Christmas tree for tax lawyers and accountants. It is not going to create one new job in manufacturing," said Republican publishing executive Steve Forbes, who was made available to reporters by the Bush campaign.
The Business Roundtable, which represents chief executives of 150 of the nation's largest companies, and the U.S. Chamber of Commerce (news - web sites), both of which are backing Bush's economic program, were critical of the Kerry proposal.
Tita Freeman, a spokeswoman for the Business Roundtable, said Kerry's plan would "increase taxes on multinational corporations" and cause them to lose foreign market share.
However, Gene Sperling, who served as chief economic adviser in the Clinton administration, said that 99 percent of U.S. companies would see reduced taxes under Kerry's reduction in the corporate tax rate and only 1 percent would see their taxes rise because of the elimination of the tax deferral exclusion.
"This is tax reform that takes away incentives to move jobs overseas," Sperling said. "I think there will be many business groups that will support it."
Rep. Charles Rangel, the senior Democrat on the House Ways and Means Committee, praised Kerry for proposing a bold stroke that "would eliminate the most egregious incentives for companies to move jobs overseas."
Separately, the Media Fund launched a television ad focusing on the differences between Kerry's tax plan and the administration's for the middle class. The 30-second commercial, which will begin Monday, says Bush's priorities "won't strengthen America."
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