We have some devs in other countries. We pay them about $80K/yr. We have been trying to hire locally. The positions have been advertised for about 6 months at $140K/yr. We have only had unqualified people apply so far. We then bumped the salary to $160K. Still no go.
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.
I am highly skeptical that there are no US applicants that can do the job and accept $160k TC. I think you guys just enjoy the wage arbitrage and this is an inherit bias in your hiring process.
I would say that's fine. The law can do two things, incentivizes you to try to hire locally, and if you can't, prop up the tax payer coffins with a 25% tax, then maybe use that to generate other jobs, provide services, etc.
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.
Training would perhaps be at 50K/yr USD in current environment, and it would be not too many taking up in US environments. In developing nations you can get equivalent training talent at 10K USD/yr, and equivalent fully-trained at 50-80k USD/yr en-mass.
- 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.
Not to distract from the point you're making, but over here in <outsourcing destination> 50k is a lowball offer - at least for people with more than around seven years in the industry.
It is brazenly unequal. If your company makes things for 5e international markets, and you employ international production staff, you now have to separate things you do for US consumers and things you do for non-US consumers to figure out how much of this tax you should pay, it’s an accounting nightmare, especially if you ship the same product to Us and non-US consumers. More so, your non-US competitors can still ship product to US consumers without being subject to the tax, and other companies might retaliate with a tax on US labor that targets their own market, because why not?
Realistically if they are doing 20% of their US business in say Vermont, they should have to employ 20% of their workforce there. 15% in California? 15% of US head count in California. All they do is extract and hide the money. That needs to stop. Don't want to? Well your competition and new entrants will.
So if you're doing B2B business primarily within the US, you have to hire/fire a bunch of employees in different states every time you sign a new contract? That sounds incredibly burdensome.
The core questions are: Why does a company want to be a US company and why would companies want to hire US employees? With those two lenses in place does this help? The first one is a clear 'no', this makes companies not want to be US companies. For the second one it does give some reason but as others have pointed out, giving incentives and not penalties is generally a better way to do things since that doesn't remove a company's incentive to be a US company and gives them a reason to want to hire local. Similarly, ensuring the workforce is capable and competitive would be a better response because those give clear 'yes' answers to the two questions. Maybe invest in education instead of driving companies away with penalties? Nah. That's crazy.
As a Scottish former founder with a bunch of founder mates outside the US:
> 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.
So this only applies to American companies? So I’d a German company decides to use Indian labor to do something for US consumers, they avoid the tax, but Facebook or Google would pay it. Since these companies also have international markets for their products, how would Apple figure out how much of their iPhone work is for US consumers and how much isn’t?
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.
I'm not a lawyer, but doesn't it applies to services you buy too? Like of, god forbid, a US company pay for SAP, it'll be 25% too? or if you pay for spotify when apple Music exist, it'll be a 25% surcharge?
I think there could be a case for a fixed amount of annual tax credit for each US citizen that is employed by a company - since presumably that person is not on the government payroll or on benefits so the US government is saving money.
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".
More and more parallels to Peronist econ are emerging in the US. All that is missing is a rationalization of taxes on exports. Both sides of the aisle seem opposed to laissez-faire liberalism.
> any money paid by a U.S. company or taxpayer to a foreign person whose work benefits U.S. consumers.
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"?
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.
They're going for gut reactions by people who are either incapable of or choose not to use second-order thinking. It's all about the gut -- if you look deeper, you're a lousy ivory tower liberal, yadda yadda.
What if I told you, this is already enforced in the form of tax withholding (W8-BEN) but it only affects a few countries that are considered "tax heavens".
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.
We have some devs in other countries. We pay them about $80K/yr. We have been trying to hire locally. The positions have been advertised for about 6 months at $140K/yr. We have only had unqualified people apply so far. We then bumped the salary to $160K. Still no go.
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.
I am highly skeptical that there are no US applicants that can do the job and accept $160k TC. I think you guys just enjoy the wage arbitrage and this is an inherit bias in your hiring process.
I would say that's fine. The law can do two things, incentivizes you to try to hire locally, and if you can't, prop up the tax payer coffins with a 25% tax, then maybe use that to generate other jobs, provide services, etc.
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.
Can you share the job ad posts here?
Have you tried training devs locally?
Training would cost 140k/yr and then the dev would skip to a company that can pay more because they don't invest in training.
Training would perhaps be at 50K/yr USD in current environment, and it would be not too many taking up in US environments. In developing nations you can get equivalent training talent at 10K USD/yr, and equivalent fully-trained at 50-80k USD/yr en-mass.
(now potentially 20% higher)
Maybe your hiring process is broken? Your offshore hiring process is handled externally?
> You can wish for those jobs to come back all you want. It is not happening in any significant numbers
It started happening with batteries and energy infrastructure. Then the GOP killed that because its base prefers to own the libs.
I don't see how that will do anything:
- 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.
Not to distract from the point you're making, but over here in <outsourcing destination> 50k is a lowball offer - at least for people with more than around seven years in the industry.
We shouldn't refrain from passing a law just because it can be circumvented or because it has partial instead of total desired effect.
It is brazenly unequal. If your company makes things for 5e international markets, and you employ international production staff, you now have to separate things you do for US consumers and things you do for non-US consumers to figure out how much of this tax you should pay, it’s an accounting nightmare, especially if you ship the same product to Us and non-US consumers. More so, your non-US competitors can still ship product to US consumers without being subject to the tax, and other companies might retaliate with a tax on US labor that targets their own market, because why not?
No, we should refrain from passing laws that are anticompetitive and unenforceable, like this one is.
Those are exactly the laws we should refrain from passing
[dead]
Realistically if they are doing 20% of their US business in say Vermont, they should have to employ 20% of their workforce there. 15% in California? 15% of US head count in California. All they do is extract and hide the money. That needs to stop. Don't want to? Well your competition and new entrants will.
So if you're doing B2B business primarily within the US, you have to hire/fire a bunch of employees in different states every time you sign a new contract? That sounds incredibly burdensome.
The core questions are: Why does a company want to be a US company and why would companies want to hire US employees? With those two lenses in place does this help? The first one is a clear 'no', this makes companies not want to be US companies. For the second one it does give some reason but as others have pointed out, giving incentives and not penalties is generally a better way to do things since that doesn't remove a company's incentive to be a US company and gives them a reason to want to hire local. Similarly, ensuring the workforce is capable and competitive would be a better response because those give clear 'yes' answers to the two questions. Maybe invest in education instead of driving companies away with penalties? Nah. That's crazy.
As a Scottish former founder with a bunch of founder mates outside the US:
> 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.
So this only applies to American companies? So I’d a German company decides to use Indian labor to do something for US consumers, they avoid the tax, but Facebook or Google would pay it. Since these companies also have international markets for their products, how would Apple figure out how much of their iPhone work is for US consumers and how much isn’t?
The bill: https://www.moreno.senate.gov/wp-content/uploads/2025/09/The...
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.
I'm not a lawyer, but doesn't it applies to services you buy too? Like of, god forbid, a US company pay for SAP, it'll be 25% too? or if you pay for spotify when apple Music exist, it'll be a 25% surcharge?
Like a tariff, but on services?
I think there could be a case for a fixed amount of annual tax credit for each US citizen that is employed by a company - since presumably that person is not on the government payroll or on benefits so the US government is saving money.
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".
That makes all the companies of that locality uncompetitive. They will move elsewhere to remain competitive.
Create company overseas and then it is B2B relationship and not outsourcing.
What does the senator think happens to the US dollars sent overseas, to pay these people?
> What does the senator think
There is little evidence to suggest that any senators poses the power of thought.
Seems like a good way to get American companies to incorporate in Ireland.
More and more parallels to Peronist econ are emerging in the US. All that is missing is a rationalization of taxes on exports. Both sides of the aisle seem opposed to laissez-faire liberalism.
> any money paid by a U.S. company or taxpayer to a foreign person whose work benefits U.S. consumers.
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.
Headline farming. You come up with feel-good proposals to get to the top, so your name would be recognized later on.
I might be completely wrong, but it’s technically a strategy that works well.
They're going for gut reactions by people who are either incapable of or choose not to use second-order thinking. It's all about the gut -- if you look deeper, you're a lousy ivory tower liberal, yadda yadda.
I'm a US citizen living in The Netherlands. Am I a US Person or a Foreign Person?
According to IRS you are definitely a US Person
No need to enforce, companies will eagerly leave the state just knowing that it could.
What if I told you, this is already enforced in the form of tax withholding (W8-BEN) but it only affects a few countries that are considered "tax heavens".
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.
Brilliant