McDermott Sponsors Legislation to Protect
American Manufacturing Jobs
For Immediate Release - April 11, 2003

Washington, DC - Joining with Representatives Rangel (D-NY) and Crane (R-IL), Congressman McDermott has introduced The Job Protection Act of 2003 (HR 1769). The legislation is a response to a World Trade Organization (WTO) ruling that the existing U.S. Extraterritorial Income (ETI) tax system does not comply with WTO agreements. ETI was a tax device designed to level the playing field between U.S. exporters and foreign competitors.

Many countries, particularly in Europe, rely heavily on various kinds of sales tax, such as the Value Added Tax (VAT) for revenue. The U.S. relies primarily on income taxes. Since the U.S. does not collect VAT, when countries that rely on a sales tax or other consumption tax export goods to the U.S., they are effectively cheaper here than American goods. To level the playing field for U.S. companies, the federal government enacted the ETI regime, which results in an annual $4 to $6 billion tax reduction for U.S. exporters.

Last year, the Chairman of the House Ways and Means Committee, Bill Thomas (R-CA) introduced legislation that would repeal ETI benefits. As one of the most outspoken opponents of the Thomas proposal, Rep. McDermott said "At a time when the United States is losing millions of jobs, the arrogance and callousness embodied in the Thomas proposal is astounding. Based on data from the Congressional Research Service, research suggests that most of the benefits in the Thomas bill would flow to multinational corporations, particularly pharmaceutical, tobacco, and oil and gas companies. Repealing ETI would have been devastating to Boeing, difficult for Microsoft and disastrous for workers in my state. Fortunately, some of us have crafted another approach."

The bipartisan Rangel-Crane-McDermott's approach, The Job Protection Act, would phase the ETI regime out over a number of years while phasing into tax law new provisions to effectively lower the corporate tax rate for firms that manufacture their goods in America.

McDermott said, "Enactment of The Job Protection Act would do two things: First, it brings our country's tax law into compliance with our international obligations. Second and most important, it creates a means to help prevent losing American jobs to cheap overseas labor."