Rep. Bill Pascrell’s multiyear effort to bring American jobs back to the United States through tax incentives may find success now that some of his tax proposals have been included in President Joe Biden’s broader $2 trillion infrastructure plan.
The North Jersey lawmaker reintroduced earlier this month his “Bring Jobs Home Act” (H.R. 2341), which would add both carrots and sticks to the federal Internal Revenue Code in an effort to return jobs to U.S. shores. Pascrell is the only member of New Jersey’s House congressional delegation who sits on the Ways and Means Committee, the panel responsible for drafting tax legislation.
“The continued shipping of jobs overseas ruins families, cripples our economy, entrenches regional imbalance, and saps American morale. Realizing our full promise as a nation demands we bring jobs home,” Pascrell said in a recent press statement. “Using our tax code is a long-hidden key to unlocking this problem and returning jobs home.
Tax Rewards, Tax Punishment
Approximately 300,000 U.S. jobs are outsourced by the United States each year, according to IT consulting firm Aptude. The top reason cited for sending jobs abroad is cost savings.
Pascrell, whose 9th Congressional District largely includes towns in Bergen and Passaic counties, said his bill would reward companies that bring their production back to the United States and close what he described as loopholes in the Internal Revenue Code “that pay unscrupulous firms to send jobs overseas.”
On the reward side, Pascrell’s legislation would amend federal tax law to provide a tax credit for companies that move jobs and business activity back to the United States. The credit would be equal to 20 percent of the cost associated with returning such jobs and business activity to the U.S.
On the punishment side, Pascrell’s bill would end a tax deduction for companies that outsource jobs and business activity. Pascrell said current federal tax law allows firms to define moving personnel and components of a company to a new location as a business expense that qualifies for a tax deduction.
Pascrell’s Bring Jobs Home Act currently has four co-sponsors: Reps. Tom Suozzi (D-NY), Eleanor Holmes Norton (D-DC), Julia Brownley (D-CA), and Eric Swalwell (D-CA).
Tax Credit for Onshoring in Biden Plan
“I am gratified key elements of our bill are included in President Biden’s landmark American Jobs Plan. Together they are a roadmap to bringing jobs home,” Pascrell said.
Tax provisions in President Biden’s infrastructure plan include language that would “deny companies expense deductions for offshoring jobs” and provide companies “credit expenses for onshoring,” a March 31 White House fact sheet on the plan said.
“President Biden’s reform proposal will also make sure that companies can no longer write off expenses that come from offshoring jobs. This is a matter of fairness. U.S. taxpayers shouldn’t subsidize companies shipping jobs abroad. Instead, President Biden is also proposing to provide a tax credit to support onshoring jobs,” wrote the Biden Administration.
Rep. Pascrell, Sen. Booker ‘Stepped-Up Basis’ Tax Law Change
Another tax law change that Pascrell is eying would change the way capital gains taxes are applied when people die, and pass on their assets to heirs. Pascrell introduced legislation (H.R. 2286) on March 29 that would amend the Internal Revenue Code to tax unrealized capital gains on certain transfers of appreciated capital assets.
Proponents of this proposal to close the “stepped-up basis” loophole in the tax code say it would provide for a more equitable tax code. The idea is being eyed at a time when Congress is seeking revenue raisers to fund Biden’s infrastructure plan. A group of Senate Democrats, which includes Sen. Cory Booker, introduced a “discussion draft” bill the same day as Pascrell to close the loophole in tax law.
Pascrell said in an April 13 tweet that his bill “would close the stepped-up basis loophole, which lets the richest people in the world avoid paying taxes on their inheritances.”
Under current tax law, someone who inherits investments or real estate isn’t taxed on the appreciation that took place before they acquired the asset. Section 1014 of the Internal Revenue Code states that the basis of an inherited asset rises “to the fair market value of the property at the date of the decedent’s death.”
Booker explained the ‘stepped-up basis’ loophole “allows heirs to step up their cost basis in inherited property to match the value on the date of the previous owner’s death, meaning that only capital gains above that point could ever be subject to income taxes.”
Booker and and his colleagues described the Section 1014 provision as “one of the largest tax breaks in the entire federal tax code, with the Joint Committee on Taxation estimating that it is worth $41.9 billion in 2021 alone.”
“Generations of the U.S. tax code subsidizing the richest households have entrenched an extraordinary wealth gap, especially by race,” Booker said.
Both Pascrell’s proposal and the discussion draft bill offered by Booker and Sens. Chris Van Hollen (D-Md.), Bernie Sanders (I-VT), Sheldon Whitehouse (D-RI), and Elizabeth Warren (D-MA), would exempt up to $1 million in unrealized capital gains from taxation.
Pascrell, who chairs the House Ways and Mean’s panel’s oversight subcommittee, said he welcomed comments and suggestions for clarifying and improving his bill, but noted the tax law change he’s proposing would make “the wealthiest Americans pay their fair share.”
Opposition from Tax Reform Group, GOP
American for Tax Reform (ATR), a group that opposes any tax increases, offered immediate feedback on the proposed “stepped-up basis” change.
“This will impose a steep tax increase and paperwork nightmare for small businesses, farms, and families,” the group’s communications director, John Kartch wrote March 29 on the ATR website.
Kartch added that the White House moving forward with the proposal “may also violate” President Biden’s campaign pledge “against raising any tax on any American making less than $400,000.”
Likewise, House Ways and Means Republicans criticized the proposal, saying that a stepped-up basis tax law change would impose “a second Death Tax that will increase paperwork and costs” in addition to the current estate tax.