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Bernie Sanders’ Entirely Ludicrous Outsourcing Prevention Act

Thank goodness Donald Trump did actually win and that Bernie Sanders didn’t gain the nomination let alone the office. For today he’s treating us to his version of something called the Outsourcing Prevention Act and a load of, well, a load of economic nonsense it is too. The aim is to stop American corporations from sending jobs overseas–not that any ever do that, it’s rather difficult to pack a job up into a shipping box. They do though, sometimes, relocate their production lines which is what we must assume he means. The net effect of Bernie’s proposals, once we strip out the truly silly parts of it all, will be to reduce the number of jobs created in America in the first place. This is not known as something which helps or aids the working gal. I’ve no doubt at all that President-elect Trump, given his views on trade, will announce something or other soon enough but I do hope that it won’t be as ludicrous as this.

One report:

Sen. Bernie Sanders (I-Vt.) said Saturday he will introduce legislation aimed at preventing major companies from sending jobs to foreign countries, similar to what President-elect Donald Trump proposed on the campaign trail.

Well, Bernie seems to think you just pack up those jobs in the U-Haul and head for the border, doesn’t he?

Sanders on Saturday warned “it is not good enough to save some of these jobs” and said Trump should use as leverage United Technologies’ defense contracts, Export-Import Bank financing, and tax breaks.

“I call on Mr. Trump to make it clear to the CEO of United Technologies that if his firm wants to receive another defense contract from the taxpayers of this country, it must not move these plants to Mexico,” the senator from Vermont said in a statement.

That use of the phrase “tax breaks” is a huge indication that Bernie has no idea of the subject under discussion, something which we’ll get to:

The Outsourcing Prevention Act would “impose a tax on all companies that outsource jobs.” The proposed tax would be equal to “the amount of savings achieved by outsourcing jobs or 35 percent of its profits, whichever is higher.”

The proposed legislation would also penalize companies that outsource more than 50 jobs by barring them from receiving federal contracts, tax breaks, grants or loans. Companies that have already outsourced 50 jobs would face requirements to pay back federal tax breaks and loans, and receive tax penalties on stock options and bonuses.

Just nonsense. The proposal, in as much detail as Bernie has released, is here:

President-elect Trump made a promise during the campaign that he would prevent all of these jobs from being shipped overseas. The Outsourcing Prevention Act would make sure that Donald Trump keeps this promise by:

1. Preventing companies that outsource jobs from receiving federal contracts, tax breaks, grants or loans.

Last year, United Technologies received over $6 billion in federal contracts, making it the seventh largest recipient of federal contract funds. Over the past 15 years, this Fortune 500 company has used loopholes in the tax code to shelter more than two-thirds of its $38 billion in profits from federal taxation. It has also received over $50 million in corporate welfare from the Export-Import Bank. Under this legislation, companies would be barred from receiving future contracts, tax breaks, grants or loans from the federal government if they have announced plans to outsource more than 50 jobs overseas.

It’s that tax breaks and loopholes bit there which scares the most. Because of course one of the major tax “breaks” is depreciation. Which isn’t in fact a tax break at all. It’s a method of making sure that companies cannot claim massive great tax breaks now.

To explain this. Companies are taxed upon their profits, profits are what’s left over out of revenue once you’ve paid all the costs of what you’re doing. When you buy a truck this is obviously a cost of doing business, that cost should come off revenues before profits are calculated. But this is not what the tax system does. Instead, it says that (this is roughly, to describe the idea) the truck will last 5 years thus you can count 1/5th of the cost of the truck as an expense each year. If the tax system didn’t do this then the company could claim all of the cost of the truck in that first year.

So depreciation allowances are not a tax break. Something like them is going to exist in the tax system however we do it. And the way it works now is that they’re actually an anti-tax break. Depreciation insists that you must pay more tax now than would be true in a system without depreciation allowances. Even accelerated depreciation works this way.

Article source: http://www.forbes.com/sites/timworstall/2016/11/27/bernie-sanders-entirely-ludicrous-outsourcing-prevention-act/

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