By Shailagh Murray
Washington Post Staff Writer
Wednesday, June 9, 2010; A06
The threat of U.S. jobs heading abroad has become such a potent campaign issue this year that congressional Democrats are moving quickly to capitalize on it -- and to use it against Republicans.
Democratic leaders are pushing a package of hefty corporate tax increases intended to discourage businesses from moving their operations overseas. They have attached the proposed increases to a bill that would extend unemployment benefits and tax breaks to businesses, all but daring GOP lawmakers to vote against it.
Republicans and their allies in the business community say the effort, pending in the Senate, could backfire. They say it will slow the recovery and inflict more pain on American workers. But with unemployment hovering close to 10 percent, Democrats are using whatever legislative tactics they can think of to demonstrate leadership on the economy before the Nov. 2 midterm elections.
"It's not rocket science," said Eddie Vale, a spokesman for the AFL-CIO. "People are unemployed, or their brother is, or their next-door neighbor is. If Democrats want to win races in 2010, they need to show people they're creating jobs for them. And repealing tax breaks that send jobs overseas is a direct corollary."
At issue are nine corporate tax changes in the American Jobs and Closing Tax Loopholes Act of 2010, approved by the House on May 28 and introduced in a modified form Tuesday in the Senate. The provisions would alter long-standing laws on overseas income intended to prevent U.S. companies from facing double taxation. Together, they would raise an estimated $14 billion over 10 years.
The new revenue would help pay for an extension of jobless benefits and the renewal of more than 70 temporary tax breaks for business that expired Dec. 31. Business groups, including the U.S. Chamber of Commerce, had pressed Congress for months to reinstate the temporary tax breaks, but many are unwilling to support the legislation if it also includes the tax increases on foreign income.
Some corporations are hoping to defeat or least scale back the foreign tax provisions in the Senate, where a handful of moderate Democrats have criticized a separate tax increase in the bill that targets investment income. But given the public's hostile mood toward big business, opponents of the measure may have limited bargaining power.
"We have focused in this bill on the most egregious examples," said Rep. Chris Van Hollen (D-Md.), a member of the House leadership. "These are provisions that are on their face are impossible to justify."An emotional issue
The battle against the outsourcing of U.S. jobs goes back to the dawn of globalization. But polls show the issue has taken on a moral dimension as the pain of the recession lingers. It is particularly pronounced in struggling Rust Belt states, where some of the most contentious campaign battles are unfolding and where control of Congress may be determined.
"It's incredibly dangerous to be on the wrong side of this issue," said Democratic pollster Geoff Garin. Among the voters he has surveyed, Garin said, "there's a belief that the most important thing we can do to prevent unemployment is to keep jobs from going overseas."
Democrats discovered the issue's potential last November, with Bill Owens's surprise win over GOP candidate Doug Hoffman in a Republican House district in Upstate New York. "Millionaire Doug Hoffman wants to keep tax breaks for companies that ship our jobs overseas," the Democratic Congressional Campaign Committee declared in a television ad that aired a few days before the election.
In last month's special House election in Pennsylvania, Democrat Mark Critz blamed job exporting for the region's economic woes and accused his opponent, businessman Tim Burns, of taking advantage of foreign "tax loopholes" through his former pharmacy software company, TechRx. Burns denied the charge, but Democrats believe it helped Critz secure his unexpectedly wide victory margin.
Democrats have also targeted Carly Fiorina, a former chief executive of Hewlett-Packard who is running for the GOP Senate nomination in California. A recent Democratic Senatorial Campaign Committee news release described "Fiorina's job creation plan -- for China, India, Canada, Ireland . . . and 174 other countries."
But Fiorina said in a recent interview that the problem is more complex. "Everyone worries about the fact that there are closed factories in Youngstown," she said. "It is government policy among other things that is driving factories out of Youngstown. So bring them back. Instead of trying to outlaw outsourcing, which is what the Democrats are trying to do, motivate in-sourcing."Conservatives push back
On May 20 congressional Democrats unveiled a new round of economic incentives, combining the further extension of unemployment benefits with the renewal of the business tax breaks. But conservative Democrats balked at the cost to the deficit, forcing negotiators to add $57 billion in tax increases, including the overseas-income provisions.
That led to a revolt by the U.S. Chamber of Commerce, which sent a letter to lawmakers warning that proposed changes to the foreign tax credit -- including several that would take effect retroactively -- could be "severely detrimental to the ability of American worldwide companies to compete globally, create jobs, and stimulate economic growth."
When all but one Republican, Rep. Anh "Joseph" Cao (La.), voted against the House version, many GOP lawmakers cited the foreign-income provisions. "I know the Democrats like to call them corporations," Rep. Pete Sessions (R-Tex.) said in a House floor speech, "but I call them employers."
Staff writer Dan Balz contributed to this report.