Legislation Eliminates "Haircut" for Overseas Operations
Washington, DC - Senators Gordon Smith (R-OR) and John Breaux (D-LA) have introduced the American Manufacturing Jobs Bill of 2003 (S. 1922). The legislation is identical to the Finance Committee-passed Jumpstart Our Business Strength Act (S. 1673), except that it eliminates the provision known as the "haircut" and reduce taxes for all manufacturers who employ American workers.
"In my state, we need jobs, and it doesn't matter to working families whether their paychecks are coming from companies with or without overseas operations. We have a duty to encourage the retention and creation of manufacturing jobs in the United States," Smith said. "We shouldn't treat American jobs created by multinational companies as less worthy than those created by strictly domestic manufacturers. Congress should be in the business of encouraging everyone who wants to employ our citizens."
On October 1, the Senate Finance Committee passed S. 1673 to repeal the FSC/ETI tax benefit and avoid WTO-approved sanctions against U.S. companies. The centerpiece of this legislation is tax rate reduction on manufacturing income over time by three percentage points. However, this rate cut is not applied equally to all U.S. manufacturers. Rather, the bill includes a provision - known as the "haircut" - that provides less of a benefit to U.S. companies that also manufacture abroad. Smith's legislation would simply extend the tax rate reduction to all manufacturing businesses who employ American workers.
U.S. companies with global operations employ more than 23 million Americans - nine million in the manufacturing sector - amounting to approximately 60 percent of all manufacturing jobs in this country. Foreign-owned companies with U.S. operations employ an additional 2 million U.S. workers. These workers will suffer if the "haircut" remains and companies are therefore discouraged to invest in the U.S.
