Well, in my opinion the new tax bill contains two new provisions that reward offshoring --

The fact that the GILTI is a tax on intangible income so it its reduced if you have more investment abroad; and the cost of goods sold exemption in the BEAT.

1/x https://twitter.com/toddntucker/status/1312781851896033281

You can debate whether deferral (under the old tax law) was more favorable to offshoring that the 50% of the top US tax rate global minimum on offshore income (GILTI) -- but there is no doubt deferral was settled at 15.5% (above 10.5% on GILTI)

2/x

And I think you also have to look at what has happened to the effective tax rate on companies that aggressively offshored IP and production -- a lot of chip designers and pharma companies (Abbvie for ex) are reporting sub 10% effective tax rates

3/x

One can similarly look and see in the data if the tax reform led U.S. firms to reduce the amount of profit they shift to low tax jurisdictions.

Quick answer is that it didn't. (the recent fall is a function of the pandemic, profits in high tax jurisdictions are down too)

4/x

one could equally ask if the tax cuts and jobs act led industries that had offshored production for tax reasons (such as big pharma) to return home.

Answer there is no -- pharma imports and the pharma deficit soared after all the changes in the tax code

5/x

Given the complexity in the tax code (GITLI on a global basis & BEAT with an exemption for the cost of imported goods v indefinite deferral but a residual large liability upon repatriation), I think some weight needs to be given to observed results

6/x

One could also ask if the set of proposals that Biden has proposed would reduce incentives for offshoring by increasing tax on foreign income that has been profit shifted to tax havens, getting rid of the deemed return on offshore tangible assets and going country by county

7/x

I obviously am supporting Biden, but think the answer is clearly yes -- Biden's proposals would close the pro-offshoring loopholes in the tax cuts and jobs act.

I have in fact testified to this very point

8/x

https://www.congress.gov/116/meeting/house/110445/witnesses/HHRG-116-WM02-Wstate-SetserB-20200205.pdf

And this blog post has a set of detailed links outlining how pharma companies have raised investment in Ireland for new patent protected meds after the tax cuts and jobs act, and laying out how the tax reform failed to end the incentive to offshore

https://www.cfr.org/blog/irish-shock-us-manufacturing

9/9