One other major point of contention (that relates to taxes) in last night's debate was President Obama mention of "tax breaks [given] to companies that are shipping jobs overseas." It's not entirely clear what he was talking about, so let's do our best to sort this out. From the transcript of the debate, here's what the President said:
When it comes to our tax code, Governor Romney and I both agree that our corporate tax rate is too high, so I want to lower it, particularly for manufacturing, taking it down to 25 percent. But I also want to close those loopholes that are giving incentives for companies that are shipping jobs overseas. I want to provide tax breaks for companies that are investing here in the United States.
[...]When it comes to corporate taxes, Governor Romney has said he wants to, in a revenue neutral way, close loopholes, deductions -- he hasn't identified which ones they are -- but that thereby bring down the corporate rate. Well, I want to do the same thing, but I've actually identified how we can do that. And part of the way to do it is to not give tax breaks to companies that are shipping jobs overseas. Right now, you can actually take a deduction for moving a plant overseas. I think most Americans would say that doesn't make sense. And all that raises revenue.
And here's how Mitt Romney responded:
[Y]ou said you get a deduction for taking a plant overseas. Look, I've been in business for 25 years. I have no idea what you're talking about. I maybe need to get a new accountant. [...] But -- but the idea that you get a break for shipping jobs overseas is simply not the case.
After poking around, there seems to be two possibilities as to what the President was referring to. The Tax Foundation speculates that he was talking about "tax deferral." This allows businesses operating in foreign countries to defer the taxes owed to the U.S. until those profits are brought back onshore. Here's a quick video that explains it well:
That additional 10% in taxes levied by the U.S. Treasury is, like, a LOT of money. Senator Carl Levin of Michigan recently held hearings on shifty offshore profits and he estimated that $1.7 trillion is sitting around out just avoiding U.S. tax by way of some very tricky maneuvering. The President may be saying (although not very well) that if the U.S. corporate rate was lowered and all the games played by corporations to keep profits overseas were disallowed, and more incentives were given to businesses to build factories and whatnot here, more jobs would be created here. If that's what he meant, it's understandable that Willard wouldn't have the foggiest.
The other possibility is that President Obama was simply talking about is the deduction for the expenses that companies incur by simply, you know, employing people. From the Joint Committee on Taxation (via the Washington Post Fact Checker):
Under present law, there are no specific tax credits or disallowances of deductions solely for locating jobs in the United States or overseas. Deductions generally are allowed for all ordinary and necessary expenses paid or incurred by the taxpayer during the taxable year in carrying on any trade or business, which includes the relocation of business units.
The Post's Glenn Kessler writes, "The JCT estimated that ending the deduction for moving operations overseas would raise just $168 million over a decade." It's hard to fathom the President getting too worked up over a measly $168 million.
So which is it? Personally, I'm going with the Tax Foundation on this one. Corporations can move those foreign profits all over the place until the cows come home to avoid paying the additional tax to the U.S. It's more than plausible that President Obama would like to get that money back onshore, but do all the offshore games amount to "tax breaks [for] companies that are shipping jobs overseas"? Seems like a stretch.
"Tax Breaks for Shipping Jobs Overseas" [Tax Foundation]
Factchecking the first presidential debate of 2012 [WaPo]