Ohio senator introduces 25% tax on companies that outsource jobs overseas
foxnews.com
foxnews.com
Again, we get takers, but they can't match the skill level of overseas devs at double the salary.
Will we pay the 20% tax/fine? Grudgingly yes. Particularly if this stuff becomes law and local labor force becomes even more expensive than it is now.
I can also see people coming up with creative ways to circumvent having to pay the tax. It is possible that some companies will move out entirely or create a legally separate entity offshore that is responsible for all the work that they wish to outsource.
The same sort of thing happened with manufacturing jobs. You can wish for those jobs to come back all you want. It is not happening in any significant numbers.
(now potentially 20% higher)
The more important question is if it will hurt the economy in the area. So your mentions of bypassing it, companies leaving to go elsewhere, and so on.
Personally, I think it would make more sense to tax companies that want to sell in Ohio, and offer tax credit to those who also employ in it. Though it's hard to predict how any such idea would play out. Otherwise it seems to hurt local companies the most as their cost to compete goes higher.
It started happening with batteries and energy infrastructure. Then the GOP killed that because its base prefers to own the libs.
Innovating new battery chemistries or a new BMS is hard, but cell, module, and pack assembly is fairly straightforward.
Basically, my opinion is our blocker in the space wasn't lack of IP or domain knowledge, but the extremely high upfront costs to start, which is what IRA helped remediate.
With significant portions of the tech industry, it's the other way around - we may have coders, but we increasingly don't have the domestic domain experience at the entry and mid-level.
Yes. The CHIPS Act and IRA provided avenues to that capital, directly and indirectly.
But a CHIPS or IRA style policy wouldn't work if trying to bring services or IP-first industries back to the US. In my vertical (cybersecurity/DevSecOps) much of the domain experience has been hollowed out domestically for almost 10-15 years now.
If you're offshoring for the sake of R&D and IP generation, cost isn't a significant pressure (eg. Top Cybersecurity talent in Israel can demand US level salaries, and similar talent in India can demand EU level salaries).
There's a much larger pipeline and skills problem in several subdomains in the tech industry that are highly underestimated by HNers.
Totally agree.
It's very hard to find software engineers and PMs with a security background in the US, which makes delivery difficult, while in countries abroad, finding a candidate who has a background in eBPF, OS internals, computer hardware, networking, C/C++, and CloudOps/DevOps topics like K8s or IAM all at once is fairly easy to find.
Since the mid-2010s, American CS programs have increasingly dropped OS, CompArch, and Networking classes or provide a single summary class that most students promptly forget after the class is complete, because LeetCode-driven hiring simply didn't incentivize this kind of knowledge.
Meanwhile, in Israel, Romania, India, and Poland, these skills are fairly table stakes requirements in a CS degree. You see this reflected in Cybersecurity startups as well - almost all early stage startups in the space are now Israeli or Indian founded, with either a small office of diaspora in the Bay or in the old country.
It's even worse on the chip design side, because the salaries in the field are low in the US ($80-110k), margins are low in the industry being hardware based, AND students increasingly don't take Computer Design, Circuits, DSP, and Logic Design because CS is increasingly segregated from ECE, and EE/CE enrollment is falling. Meanwhile, a course like DSP is made a CS requirement as well as an EE requirement in India, China, Israel, and Eastern Europe
Oh it won't take long if some company with deep pockets wants out of this. An 'exemption category' will be quietly put in and those who paid the right people will qualify. This is Trumpinomics now at the state level; put out harsh new rules and then let people pay you off to get exempted from them.
This is the point. They could just BAN outsourcing. But letting it just be more expensive is a compromise to allow companies to find people when overseas is the only way to do it.
>The same sort of thing happened with manufacturing jobs. You can wish for those jobs to come back all you want. It is not happening in any significant numbers.
If the tariffs stick, and get set to a sufficiently high rate, then the jobs will come back. In the meantime, investors are scared to be screwed over on new factories in the US which would be uncompetitive without tariffs.
- 25% is not enough to matter if you drop from 130k US engineer to a 40-50k outsourced
- International corporation will easily side step that since the US Corp is not paying for salaries to the foreign Corp, just dues to exploit the IP at best
So at best this would be hurtful to smaller businesses like the stupid section 174.
If I only need 10 developers to make some software and sell it globally why should I have to hire more people?
An "outsourcing payment" is defined as "any premium, fee, royalty, service charge, or other payment made...to a foreign person...to labor or services the benefit of which is directed, directly or indirectly, to consumers located in the United States."
That exempts B2B. It doesn't have a border-adjustment charge, so any country tariffed less than 25% can undercut American businesses. And it weirdly doesn't use the words wage, employee or employer, which would mean a lot of consumer purchases would be covered, from airline tickets to Spotify charges.
2. How would this work for subsidiaries or JVs? For example, when Google opens it's umpteenth office in India, it's part of a separate entity called Google India Pvt Ltd.
> Why does a company want to be a US company
A big part of this is “they want investment from US VCs which demand it”.
Stripe Atlas and co. have made it easier and more popular than ever to have a US entity and e.g. Scottish entity and hire your engineering staff in the latter.
Sounds like this may or may not be hit by this tax but it’d still be way cheaper to pay it given how much cheaper devs are over here.
Like a tariff, but on services?
The big plus is business owners love claiming tax credits. You would not really need that much paperwork or auditing as far as I can tell since you have every US employees tax info already versus trying to monitor/regulate "outsourcing".
There is little evidence to suggest that any senators poses the power of thought.
Plus, the senators consumers got access to cheaper goods and services. Jobs are not the only determinant of benefit to America.
we're not rich, we do not buy many american products.
most of the money goes into mortgage, food, school for the kids, and occasional local family trips. that's the bulk of my spending.
in my case i have a 6yo android phone, a 6yo benq monitor, a recent (2024) mac mini and some indie steam games. i do not own anything else american. i do pay for youtube premium and a netflix family account and do use amazon to buy non-american products.
a small part goes into retirement funds with a smaller part from that going to back to america.
the us runs a big trade deficit with my country so that money is not really seeing back the american shores but the part that is definitely does not head to the american people. increasing inequality mechanics imply it's proportionally more and more funneled and concentrated into the elite (stocks&bonds, rent-seeking "post"-capitalism, lobbying, fiscal optimization etc.).
Those stocks and bonds, those rent seeking post capitalism entities, they don't just sit on piles of USD like smaug. They have to do something with it. What do you do with USD?
These "giant trade deficits" are not the problem the current US government thinks they are. They aren't that giant. In any event, repatriating US jobs isn't going to "fix" whatever ails America.
the bank will get usd, aaand will probably put it into stocks/bonds/whatever financial instrument. in other things it will fund national debts.
so that's part government money, part investment money for big business.
with current government/finance policies it directly goes to feed the inequality wheel.
there are many aspects to that (tax-breaks, inflation policies, job market elasticity etc.) but the end result is the inequality is increasing and shows no sign of stopping, and that money that goes out from the bottom - in the form of less salary paid and more unemployment (leading into lower salaries) - and back through the top - national debt/big investment - is not helping.
i am not saying national debt/big corp. is inherently bad for inequality (i wouldn't know.. it s a complex topic) but i am saying that the current way they choose to spend money leads to it.
i'm not complaining, i'm on the poor side that receives usd. but i say it as i see it.
i'm not an expert, just a grunt coder wanting to start a business soon, but i try to keep informed.
How on earth is this going to defined and enforced? Isn't anything and everything shipped from overseas to the US, physically or electronically, "benefiting US consumers"?
Update: Here's the full text of the bill.
https://www.taxnotes.com/research/federal/legislative-docume...
And the definition is:
The term 'outsourcing payment' means any premium, fee, royalty, service charge, or other payment made —
“(A) in the course of a trade or business,
“(B) to a foreign person, and
“(C) with respect to labor or services the benefit of which is directed, directly or indirectly, to consumers located in the United States.
...
(c) FOREIGN PERSON. — For purposes of this section, the term 'foreign person' means any person who is not a United States person, except that such term shall not include any corporation or partnership which is organized under the laws of a possession of the United States.
Note that goods are excluded, which is the only sliver of sanity in this whole thing, although it's also a loophole big enough to drive a truck through: if I get my favorite Indian outsourcing company to build me a Web app and ship it by USB drive, did I just avoid the tax?
In any case, enforcement will be by requiring everybody who files tax returns to self-report under threat of perjury:
c) REPORTING. — The Secretary of the Treasury, or the Secretary's delegate, may —
(1) require United States persons making payments to foreign persons (as defined in section 5000E of the Internal Revenue Code of 1986, as added by subsection (a)) to file a return of tax under section 5000E of such Code or to file an information return concerning such payments, which may include —
(A) information on whether such payments are outsourcing payments (as defined in section 5000E of such Code), and
(B) such other information concerning such payment as the Secretary may reasonably require to enforce the amendments made by this section, and
(2) require the officers of any corporation to certify on such return, under penalty of perjury, the character of such payments.
I might be completely wrong, but it’s technically a strategy that works well.
Enforcement is easy: You enforce at the point of "exit of money". Banks can do this enforcement or at least inform the relevant authorities about certain transactions.