Cecily Zamora
The Trump-GOP Tax Cuts and Jobs Act of 2017 has been a controversial topic, with some arguing that it encourages companies to move jobs offshore, while others claim it has kept American companies and jobs in the country. The Act reduced taxes for most taxpayers and lowered corporate debt, but it also created incentives for corporations to shift profits and operations abroad. While the Biden-Harris Administration aims to reform the tax code to discourage outsourcing, the effectiveness of such reforms is uncertain. The End Outsourcing Act, introduced by Senator Kirsten Gillibrand, aims to utilize tax codes and federal grants to end outsourcing and bring good-paying jobs back to America. However, the complexity of business decisions and the potential for manipulation of rules makes it challenging to implement effective policies.
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What You'll Learn
- The 2017 Trump-GOP tax law incentivises companies to move jobs abroad
- The End Outsourcing Act could bring jobs back to America
- Tax breaks for companies that bring jobs back to the US
- Tax cuts for most US taxpayers under the 2017 Tax Cuts and Jobs Act
- Tax reform changes for businesses and self-employed individuals
The 2017 Trump-GOP tax law incentivises companies to move jobs abroad
Under the previous system, all profits earned by foreign subsidiaries of US companies were subject to a 35% tax rate by the US when they were repatriated. However, the 2017 law introduces a territorial system, under which the US does not tax profits of US companies made in foreign countries. These profits are instead taxed by the foreign country at their chosen rate. This gives US companies a strong incentive to move operations to countries with lower tax rates, such as Switzerland, where they may pay an 8% tax rate.
The zero percent tax rate on offshore profits is more generous than any new tax provisions could be, and loopholes allow corporations to shift profits to countries with minimal or no corporate income taxes. This means that new tax cuts to incentivise bringing jobs back to the US will likely fail.
Some have suggested that new legislation could encourage corporations to move their supply chains to the US by offering a low corporate tax rate. However, it is unclear how this would change corporations' investment decisions, and such a policy would be inefficient in creating jobs in the US. Rules could be written into legislation to prevent this type of tax avoidance, but they would add complexity to the tax code and create more enforcement burdens for the IRS.
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The End Outsourcing Act could bring jobs back to America
The End Outsourcing Act, introduced by U.S. Senator Kirsten Gillibrand, could bring jobs back to America by incentivizing businesses to keep jobs in the country. The Act would utilize the tax code and federal grants, loans, and contracts to end the outsourcing of jobs overseas. It would also provide a 20% tax credit for companies to bring jobs back to the United States, helping to pay for permits, fees, leases, and general moving costs. This legislation aims to address the outsourcing of jobs from the United States to low-tax foreign jurisdictions.
The Act would amend the Internal Revenue Code to deny certain tax deductions and accounting methods for outsourcing employers. It would also require employers to include an outsourcing statement in worker adjustment and retraining notices, specifying whether positions will be moved outside of the United States. Federal contracting officers would be authorized to consider the outsourcing of jobs from the U.S. when awarding contracts, grants, loans, and loan guarantees.
The End Outsourcing Act is designed to reverse the trend of outsourcing and ensure that federal contracts, loans, and grants support companies that employ American workers. It aims to prevent companies from benefiting from tax incentives when they ship jobs overseas and create incentives for investment in domestic industries. This legislation is part of the American Jobs Plan, which President Biden supports to end outsourcing and invest in domestic jobs.
The Act also addresses concerns about the previous Trump-GOP tax law, which created incentives for American companies to move operations and jobs abroad, including a zero percent tax rate on many offshore profits. While new tax cuts or incentives may not be enough to counter the zero percent rate, the End Outsourcing Act provides a more comprehensive approach by offering tax credits and addressing federal contracts, loans, and grants.
Overall, the End Outsourcing Act has the potential to bring jobs back to America by providing incentives for businesses to keep and bring jobs to the country, while also ensuring that federal support is directed towards companies that prioritize employing American workers.
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Tax breaks for companies that bring jobs back to the US
The Trump-GOP Tax Law of 2017 incentivized American-based companies to move operations and jobs abroad by offering a zero percent tax rate on many offshore profits. In response, the Biden administration has called for reforms to the tax code to prevent companies from benefiting from such tax incentives. Additionally, President Biden has expressed support for provisions to end outsourcing and invest in domestic jobs as part of the American Jobs Plan.
To address the outsourcing of jobs, Senator Kirsten Gillibrand introduced the End Outsourcing Act. This legislation aims to utilize the tax code, federal grants, loans, and contracts to end the outsourcing of jobs overseas. The Act would provide a 20% tax credit for companies to bring jobs back to the United States, helping to cover moving costs and facility relocation expenses. It would also require companies that have outsourced jobs within five years to repay federal tax incentives and grants from facilities closed due to outsourcing.
The No Tax Breaks for Outsourcing Act, cosponsored by Senator Gillibrand, aims to end tax incentives created by the 2017 Trump tax bill that encouraged sending jobs and profits overseas. This bill would ensure that multinational corporations pay the same tax rate on foreign profits as they do in the United States.
While some have proposed additional tax breaks to lure companies back to the United States, critics argue that these incentives may not be effective. Companies could manipulate the rules to make it appear that they are increasing their domestic workforce and investments without actually creating new jobs or adding tangible assets in the country. Furthermore, it would be challenging to design rules that could accurately identify when companies are genuinely moving their supply chains back to the United States.
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Tax cuts for most US taxpayers under the 2017 Tax Cuts and Jobs Act
The 2017 Tax Cuts and Jobs Act (TCJA) reduced taxes for most US taxpayers. The Tax Policy Center stated in 2019 that the TCJA had lowered individual income taxes for approximately 65% of US households, raised them for approximately 6%, and left them unchanged for the rest. The TCJA was expected to lower taxes by an average of $1,600 in 2018 and 2025, with the top 20% of earners projected to receive roughly 65% of the savings.
The Act changed deductions, depreciation, expensing, tax credits, and other tax items affecting businesses and individuals. For example, the standard deduction nearly doubled, from $12,700 to $24,000 for married couples filing jointly, and from $6,350 to $12,000 for single filers. The child tax credit (CTC) was doubled from $1,000 to $2,000 per child, and a new $500 tax credit was created for dependents not eligible for the CTC. The TCJA also retained the individual AMT but raised the exemption levels and the income threshold, reducing the number of taxpayers subject to it.
The TCJA's tax cuts were temporary and are set to expire after 2025, leading to projected tax hikes for most taxpayers in 2026. The Joint Committee on Taxation estimated that the Act would add $1.456 trillion to annual deficits over ten years. While the Act reduced taxes for most taxpayers in the short term, it is expected to increase deficits and stimulate the economy, leading to increased GDP and employment.
Despite the TCJA's aim of reducing taxes and boosting the economy, critics argue that it encourages companies to move jobs offshore. The Act includes a 0% tax rate on many offshore profits, providing incentives for American corporations to shift operations and jobs abroad. Some lawmakers have proposed additional tax breaks to lure jobs back to the US, but it is unclear if these measures will be effective in preventing offshoring.
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Tax reform changes for businesses and self-employed individuals
The Tax Cuts and Jobs Act (TCJA) of 2017 reduced tax rates for taxpayers across all income levels. However, these tax cuts are temporary, and American taxpayers are expected to see tax hikes when the cuts expire after 2025. The expiration of the TCJA will result in substantial changes to individual income tax, causing tax increases for over 62% of tax filers in 2026.
The One Big Beautiful Bill Act, signed into law in July 2025, introduces several tax deductions for working Americans and seniors. These include:
- A maximum annual deduction of $25,000 for tip-based income, provided it does not exceed the individual's net income from the business where the tips were earned. This deduction is not available for self-employed individuals in a Specified Service Trade or Business (SSTB).
- A maximum annual deduction of $10,000 for individuals who deduct interest paid on a loan used to purchase a qualified vehicle for personal use.
- A maximum annual deduction of $12,500 ($25,000 for joint filers) for individuals who receive qualified overtime compensation, excluding those with a modified adjusted gross income over $150,000 ($300,000 for joint filers).
The End Outsourcing Act, introduced by Senator Kirsten Gillibrand, aims to bring good-paying jobs back to America and re-employ Americans who lost their jobs during the COVID-19 pandemic. The Act proposes to:
- Prohibit companies that outsource jobs from using federal tax incentives and grants.
- Offer a 20% tax credit for companies that bring jobs back to the United States, covering permit fees, leases, and moving costs.
- Require companies that have outsourced jobs within a five-year period to repay federal tax incentives and grants from facilities closed due to outsourcing.
While the TCJA and other tax reforms have made changes to deductions, depreciation, and expensing, the impact on businesses and self-employed individuals varies based on their specific circumstances. Businesses with employees should also note changes to fringe benefits and new tax credits that can affect their bottom line.
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Frequently asked questions
The End Outsourcing Act is a piece of legislation introduced by U.S. Senator Kirsten Gillibrand and U.S. Representative Mark Pocan. The act would utilise the tax code and federal grants, loans and contracts to end the outsourcing of jobs overseas.
The Tax Cuts and Jobs Act is a piece of legislation enacted in 2017. The act changed deductions, depreciation, expensing, tax credits and other tax items that affect businesses. The act also cut taxes for most U.S. taxpayers.
The Trump tax cuts made America more globally competitive, which helped working families keep their jobs and encouraged investment in forgotten parts of the country. In the seven years since the Trump tax cuts took effect, no American corporation has moved its headquarters overseas.
The Bring Jobs Home Act is a piece of legislation introduced by Democratic Senators. The act would provide a 20% credit for the expenses of eliminating an offshore subsidiary and replacing it with a domestic one.
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