Would Obama's tax code curb offshoring?

There's plenty of debate these days over how to keep U.S. jobs onshore and not exported to other countries where the labor is cheaper and the deals are better, especially in technology. This week, President Obama unveiled tax code changes that he wants to make to clamp down on U.S. companies with offshore locations. And he said his plan could curb the offshoring that has drained jobs from the United States.

In his remarks, Obama pointed to Bangalore, a major Indian IT outsourcing center. The United States has developed "a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, N.Y.," Obama said.

Obama's proposed tax changes must be approved by Congress, and it could be a long, tough fight to pass the legislation. There are just as many parties interested in keeping jobs in the United States as there are those that want them sent to cheaper labor markets.

The proposal would affect IT vendors that run subsidiaries overseas by denying deductions on things like payroll taxes, Alan Appel, a tax attorney at Bryan Cave LLP in New York, told ComputerWorld. "By denying the deduction, the hope is that it will be more expensive to operate offshore and it will give incentives to create jobs in the U.S," Cave said.

For more on Obama's proposed tax changes:
- check out this ComputerWorld.com article [1]

Related Article:
H-1B visa demand heads south--like the economy [2]
IBM will snag half of India's outsourcing work by 2010 [3]
Outsourcing heads to South America [4]
Financial sector strain means more offshoring [5]