Mitt Romney declares during debate that he knows (from all of his experience in business) that there is no deduction allowed for the costs associated with moving operations off shore. President Obama says that this type of business deduction does exist, and it should be eliminated so as to discourage instead of encourage businesses from sending jobs oversea. Who is correct?
I'm not sure about the deduction, but NAFTA and the GATT acts - passed under Clinton in the 90s, were what made it possible for American companies to scurry offshore with ease.
Certainly not a tax expert, but...
A company moving operations overseas will have to buy, build or rent a building. They will have executive travel involved. Key employees may well be transferred, with moving costs. Machinery, office furniture, etc. will have to be purchased. All of this is, I believe, deductible; thus a tax deduction will be taken.
The key may be in the definition of "deduction". As far as I know there is no direct deduction or rebate, but ordinary business expenses are still deductible.
You are quite correct. Any cost of doing business is deductible. There is no special deduction (incentive to move jobs overseas).
What President Obama was suggesting is to end some of these deductions for firms moving overseas, in order to create a disincentive to go offshore. The tax code is used to create incentives and disincentives all the time.
Romney was being very disingenuos when he said that he has been in business for 25 years, and" I have no idea what you're talking about." He knows perfectly well that these deductions exist as ordinary deductions, but since Obama made it sound like some "special" deduction, Romney chose to split hairs to make himself look more knowledgable.
In fact, Obama's idea of disallowing some of these moving expenses could very well keep companies from shipping jobs overseas.
The law currently allows a company that closes its American plant and moves manufacturing operations overseas to deduct that moving expense.
Also Senate Republicans recently blocked a Democratic bill that would have provided a tax credit to companies that move jobs back to the United States and ended a tax break for companies moving operations overseas.
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