US firms decry Obama move

Campaign against Bangalore -Buffalo rhetoric erupts in Washington

A month after US President Barack Obama came out with the “Say No to Bangalore and Yes to Buffalo” rhetoric, which now echoes in the corridors of Capitol Hill, American companies have launched a campaign against the new law that ends tax incentives to those firms which create jobs overseas.

The Technology CEO Council, a Washington-based advocacy group of US American tech-companies, on Tuesday released a report which revealed that the policy to end ‘tax breaks’ announced by Obama would result in a job loss of as many as 2.2 million Americans.

The report commissioned by the Council has been authored by Robert J Shapiro, a former Clinton administration economic official, and Aparna Mathur, a Research Fellow at the American Enterprise Institute.

Besides affecting jobs, investments in the US in plant, equipment and property could fall by as much as $ 84.2 billion. Repealing or sharply limiting deferral would not generate large tax revenues, since substantial job losses, wage cuts and lower investments would reduce tax revenues, the report said.

On May 5, Obama had announced an end to years of tax incentives to those firms which create jobs overseas in places like Bangalore. The incentives would now go to those creating jobs inside the US, in places like Buffalo city, bordering Canada.
Congress is considering legislation that would sharply limit the ‘deferral’ rules that protect US businesses from bearing much higher tax burdens on their earnings abroad than their foreign competitors in the same markets.

Crux of the matter

* The policy to end “tax breaks” announced by Obama would result in a job loss of as many as 2.2 million Americans, says a report
* Repealing or sharply limiting deferral would not generate large tax revenues, since substantial job losses, wage cuts and lower investments would reduce tax
revenues
* Investments in the US in plant, equipment and property could fall by as much as $ 84.2 billion
* Companies have intensified their lobbying against such a tax provision among the US lawmakers