At a campaign event Thursday, October 9, in Cincinnati, Ohio, Democratic presidential nominee Barack Obama repeated a long-time charge: "John McCain says he wants to keep giving tax breaks to companies that ship jobs overseas."
Get the facts!
All U.S. corporations are required to pay a 35 percent tax on income, including that earned outside the United States, but numerous loopholes complicate corporate tax laws. U.S. companies are allowed to defer paying taxes on income as long as that money is being used by the company overseas and remains "unrepatriated income." Tax experts say that can amount to a lengthy or even indefinite deferral, as long as the corporation continues its overseas operations. Deferring tax payment on income earned with non-U.S. operations does offer an incentive for U.S. companies to do business abroad.
The Obama campaign cites as the basis for its claim three Senate votes by Republican nominee Sen. John McCain going back to 1995, with the most recent one being in 2005, against repealing tax subsidies or tax deferrals for U.S. companies with overseas operations.
The Obama campaign also says McCain's economic proposals don't include proposals for changes to current law that allow U.S. companies to defer paying taxes on off-shore income.
The McCain campaign says that McCain has not made statements advocating tax breaks for overseas companies, and the campaign points to McCain's proposed reduction in the tax rate for all U.S. corporations from 35 percent to 25 percent as an incentive that would encourage multinational companies to invest more in U.S. operations and jobs. A CNN search of McCain campaign statements also found nothing advocating tax breaks for corporations operating overseas.
CNN asked a McCain campaign spokesman to explain McCain's position on tax deferred corporate income. The spokesman said the issue was being researched, but by deadline on Friday, October 10, there was no response. The campaign did supply CNN with material arguing that the loss of U.S. jobs to overseas operations cannot be linked directly to the tax rules for U.S. companies operating abroad.
Robertson Williams, principal research associate for the Washington, D.C.-based non-partisan Tax Policy Center, said the issue of taxes and domestic companies moving operations and jobs overseas is complex.
"There is the real movement of production units - you close a factory in North Carolina and start producing textiles in China with Chinese workers, and the people in North Carolina lose their jobs. Then there is the strictly financial one - a company moves its headquarters to the Cayman Islands but leaves its jobs here. Either way, there are tax implications for any company (with operations abroad) but they're not necessarily related to sending jobs overseas," Williams said.
"The point is that McCain has not come out in favor of cracking down on companies doing business overseas," Williams said. "It's one of those amorphous things - if you don't favor undoing something, does that mean you're in favor of doing it?"
Misleading. While McCain is on record voting as recently as three years ago
against eliminating or changing tax deferrals for U.S. companies with overseas
operations, he has not said he "wants to keep giving tax breaks" to companies
sending jobs overseas, as Obama stated. Obama's statement also oversimplifies
the complexities of taxes for U.S. companies operating abroad, and U.S. jobs