View Poll Results: Do you support introducing a tax on offshore help desks? Read below.

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  1. #1
    submoa is offline Member
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    Proposal: Help Desk Tax

    Thanks for taking the time to read this explanation before clicking the poll.

    I was at a Federal Government Office the other day and had an IT problem. I called the support number on the sticker of my monitor and reached someone with a distinctly Indian accent.

    It occurs to me that our tax dollars are being spent to provide people with jobs outside the US, who don't even pay US taxes. I understand it costs less to hire someone in India to work help desks, but I sure hate to see my tax dollars being used to give someone a job who doesn't even pay US taxes, much less taking a job away from an American.

    Instead of adding new restrictions on federal contracts, I'd like to propose that a new tax be introduced on offshore help desks and that this tax be set at a sufficiently high percentage to eliminate any cost advantage over hiring an American. Specifically, tax payments made for offshore help desk services.

    If you really support this idea, let your congressman know.

  2. #2
    Mike Barham's Avatar
    Mike Barham is offline Senior Member
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    Hmmmm. While I was in Afghanistan, most of the contractors (paid by the US government) hired people from many different countries. This seems to be the most cost-effective way to run the logistical side of the war. I assume the contracting to the Indians serves the same purpose.

    Your proposal would have the effect of increasing the cost of the government doing "business," and thus lead potentially to higher taxes, at least if we get a "tax and spend" administration in November rather than a "borrow and spend" one like we have now.

    I don't really have an issue with outsourcing, since I have a rather libertarian bent when it comes to market efficiency and am almost never in favor of tax increases. Carrying your taxation logic to its conclusion, the government would, for example, also be discouraged from hiring contractors like KBR in war zones or buying weapons from Beretta and FN.

    If the Indians do the job as well as Americans for less money, I say more power (and money) to them. Americans will eventually have to adjust their expectations about earnings generated by jobs that other people can do just as well for less money - or we can continue down the self-destructive road of ever-increasing tariffs and government subsidies for inefficiency.
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  3. #3
    submoa is offline Member
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    Normally, I would agree with your libertarian views against new taxation however in this case, the cost savings are short sighted.

    When you hire offshore, the income received offshore is taxed by a foreign government rather than US. Net is US tax revenue is decreased, vs. local hire. Offshoring decreases US tax revenue. Reduced tax revenue creates pressure to reduce services and/or increase rates on the remaining tax base.

    Conversely, repatriation of jobs to the US would expand the domestic base for income taxes, thereby increasing tax coffers. A higher domestic income base for taxation is a good thing as it is a direct measure of the prosperity of our nation.

    Creation of an offshoring help desk tax would partially compensate for the lost tax base while encouraging US hire and expanding the domestic tax base.

    Quote Originally Posted by Mike Barham View Post
    I don't really have an issue with outsourcing, since I have a rather libertarian bent when it comes to market efficiency and am almost never in favor of tax increases. Carrying your taxation logic to its conclusion, the government would, for example, also be discouraged from hiring contractors like KBR in war zones or buying weapons from Beretta and FN.
    Both Beretta and FN have manufacturing plants in the US that employ Americans.

    On the topic of Mike's example of use of mercenaries, learn from history:

    Carthage 3rd century use of mercenaries during the Punic War resulted in the Mercenary Wars.
    Brazil's use of mercenaries during the Brazil-Argentine war 1825-1828, almost cost them Rio de Janeiro.
    American funding of mercenaries to support Tshombe in the Congo resulted in Operation Dragon Rouge in '64 to rescue white hostages.
    Or how about the Bay of Pigs?

    By all means use mercenaries for logistical support and cannon fodder, but don't become too dependent on them.

    Quote Originally Posted by Mike Barham View Post
    If the Indians do the job as well as Americans for less money, I say more power (and money) to them. Americans will eventually have to adjust their expectations about earnings generated by jobs that other people can do just as well for less money
    Last I heard, India is a 3rd world country. Should Americans reduce their level of expectations to 3rd world standards?

    Anyone who has experienced the frustration of dealing with an offshore help desk will have different ideas about 'efficiency' - some guy who can't speak english trying to answer your questions when its 3am his time. Sure its cheaper, but the service is crap.

    Legitimate efficiencies occur in a free market economy only when everyone is dealing with the same set of rules. Offshoring results in artificical efficiencies that ultimately increase the standard of living in the foreign country and reduce those in your own.

  4. #4
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    Wealth of Nations

    Unless its a question of national security, I can't say I do. This is still a capitalist no-holds barred free-market economy, and it should go to the lowest bidder or the best brand.

    I'm in the web industry, and everyone outsources Indian and East Asian programmers all the time (note: These are ISO certified companies). In India, you can actually get a degree in Oracle! as opposed to general computer science or business information systems.

    I think it all comes down to being competitive. Besides this is the kind of thing the French do all the time (Certainteed, Alcatel, Peugot Engineering) - and I think I would rather be unemployed than French.

  5. #5
    kenn's Avatar
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    Immutable Law of Labor

    Quote Originally Posted by submoa View Post

    Conversely, repatriation of jobs to the US would expand the domestic base for income taxes, thereby increasing tax coffers. A higher domestic income base for taxation is a good thing as it is a direct measure of the prosperity of our nation.

    Creation of an offshoring help desk tax would partially compensate for the lost tax base while encouraging US hire and expanding the domestic tax base.
    This is assuming that there are qualified Americans willing and able to take those jobs. You are also assuming that there will be an agency that handles this federal mandate. They would have to create one (probably be under the Treasury Department or maybe the FCC) and that would be a large budget on its own.

    - and Carthage was broke because they had to pay that indemnity/reparation to Rome.

  6. #6
    submoa is offline Member
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    Quote Originally Posted by kenn View Post
    I think it all comes down to being competitive. Besides this is the kind of thing the French do all the time (Certainteed, Alcatel, Peugot Engineering) - and I think I would rather be unemployed than French.
    French DGSE regularly spies on foreign companies to give their domestic industries a competitive boost. Neither CIA or NSA does the same to help US companies.

  7. #7
    kenn's Avatar
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    Viva la Walmart!

    Quote Originally Posted by submoa View Post
    French DGSE regularly passes along intelligence on foreign companies to give their domestic industries a competitive boost. Neither CIA or NSA does the same to help US companies.
    We spied on the Japanese during trade negotiations in 1985 and we spied on the French during the Telecom War..

    http://www.foreignaffairs.org/199601...umber-one.html

  8. #8
    Mike Barham's Avatar
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    You can couch it however you like, but it's still protectionism and therefore out of sync with free market principles. Of course, people do generally run to Big Brother for protection when their own personal/financial interests are hurt.
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  9. #9
    Wyatt's Avatar
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    Well, unless you have never owned a foreign car, nor shopped at Walmart, and you know for a fact that all your appliances and every stitch of clothes in your closet are made in the U.S.A., then having a problem with tech support being outsourced is to some extent hypocritical.

    I have a problem with tech support in India, but it has nothing to do with a political viewpoint. My issue is that due to the language barrier, technical expertise, or a combo of both, I think the service is not nearly as good as when you would get someone in the US to walk you through a computer problem.

    After a string of Dells, the last computer I bought was a Gateway. The big selling point to me was that they have all North American tech support. Usually I get Canada when I've needed help, but that's fine. They understand what I am saying and they seem to think about finding a solution rather than just reading from a script.

    That's my point-oh-2.
    Last edited by Wyatt; 04-04-2008 at 07:21 PM.

  10. #10
    tony pasley's Avatar
    tony pasley is online now Senior Member
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    Taxes are what actually send more companies and jobs overseas the wages. The cost to companies to do business because of tax load is worse in more liberal states. Companies are in business to make a profit. Federal, state taxes are cost that companies have to pay out with little if any return, wages are a cost of doing business with return for the company. Taxes also increase the price of any product of service a company provides to the public.

  11. #11
    submoa is offline Member
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    Quote Originally Posted by tony pasley View Post
    Taxes are what actually send more companies and jobs overseas the wages. The cost to companies to do business because of tax load is worse in more liberal states. Companies are in business to make a profit. Federal, state taxes are cost that companies have to pay out with little if any return, wages are a cost of doing business with return for the company. Taxes also increase the price of any product of service a company provides to the public.
    You are right, taxes send companies overseas. True market efficiencies occur between trading partners on a level playing field. False economies exist when they are unbalanced. Such as exists in current US tax law.

    Profits earned in the United States are subject to the 35% corporate tax. But multinational corporations can defer paying U.S. taxes on their overseas profits until they return them to the USA — transfers that often don't happen for years. General Electric, for example, has $62 billion in "undistributed earnings" parked offshore, according to recent Securities and Exchange Commission filings. Drug giant Pfizer boasts $60 billion. ExxonMobil has $56 billion.

    If you had two companies in Pittsburgh that both were going to expand capacity and create 100 jobs, our tax code puts the company who chooses to put the plant in Pittsburgh at a competitive disadvantage over the company that chooses to move to a tax haven.

  12. #12
    submoa is offline Member
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    Quote Originally Posted by kenn View Post
    We spied on the Japanese during trade negotiations in 1985 and we spied on the French during the Telecom War..

    http://www.foreignaffairs.org/199601...umber-one.html
    Never passed along to US corporations.

    The Economic Espionage Act of 1996 (18 U.S.C. 1831–1839) makes the theft or misappropriation of a trade secret a federal crime.

  13. #13
    submoa is offline Member
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    Quote Originally Posted by kenn View Post
    Carthage was broke because they had to pay that indemnity/reparation to Rome.
    Carthage lost the Sicily in the first Punic War using mercenary forces. Having lost the war, Rome made Carthage pay tribute of 1,000 talents and a further 2,000 over 10 years.

    The loser mercenaries returning from Sicily found that Carthage couldn't pay them, siezed Tunis and shook Carthage down for more than originally agreed for their services.

    It gets worse for Carthage from there.

    Lesson should be not to overwhelmingly rely on mercenaries otherwise you might just make a bad economic situation worse.

  14. #14
    submoa is offline Member
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    Quote Originally Posted by Mike Barham View Post
    You can couch it however you like, but it's still protectionism and therefore out of sync with free market principles. Of course, people do generally run to Big Brother for protection when their own personal/financial interests are hurt.
    Our competitors set the rules:

    http://www.businessweek.com/autos/au...ers_jim_p.html

    Chrysler's Press says when he was at Toyota, "the Japanese government paid for 100% of the development of the battery and hybrid system that went into the Toyota Prius."

    Jim Press is former President Toyota North America.

  15. #15
    kenn's Avatar
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    Sorry for the delayed reponse, was out of town.

    Quote Originally Posted by submoa View Post
    Carthage lost the Sicily in the first Punic War using mercenary forces. Having lost the war, Rome made Carthage pay tribute of 1,000 talents and a further 2,000 over 10 years.

    The loser mercenaries returning from Sicily found that Carthage couldn't pay them, siezed Tunis and shook Carthage down for more than originally agreed for their services.

    It gets worse for Carthage from there.

    Lesson should be not to overwhelmingly rely on mercenaries otherwise you might just make a bad economic situation worse.
    In that sense you are correct. Carthage always relied on mercenaries too much, and that always put a compromise on their loyalty.

    But we're not talking about the huge percentage of forces like the Carthaginians had. The security force teams are a very small percentage of Americans over there.

    But back to our original topic, but we don't play by the rules:
    We siphon off the best and brightest from other countries with the promise of freedom and prosperity. Something we've always done.

    http://en.wikipedia.org/wiki/Brain_drain

    You see alot of companies sending H1B visas to Indians, Koreans, Etc..

    Before I forget:
    Outsourcing/Mercenary Usage/ Carthages Overuse of Mercenary units during the Punic Wars

    Submoa, Mike:
    dudes, this debate is really fun.

  16. #16
    babs's Avatar
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    Quote Originally Posted by Mike Barham View Post
    Hmmmm. While I was in Afghanistan, most of the contractors (paid by the US government) hired people from many different countries. This seems to be the most cost-effective way to run the logistical side of the war. I assume the contracting to the Indians serves the same purpose.

    Your proposal would have the effect of increasing the cost of the government doing "business," and thus lead potentially to higher taxes, at least if we get a "tax and spend" administration in November rather than a "borrow and spend" one like we have now.

    I don't really have an issue with outsourcing, since I have a rather libertarian bent when it comes to market efficiency and am almost never in favor of tax increases. Carrying your taxation logic to its conclusion, the government would, for example, also be discouraged from hiring contractors like KBR in war zones or buying weapons from Beretta and FN.

    If the Indians do the job as well as Americans for less money, I say more power (and money) to them. Americans will eventually have to adjust their expectations about earnings generated by jobs that other people can do just as well for less money - or we can continue down the self-destructive road of ever-increasing tariffs and government subsidies for inefficiency.
    I gotta agree on this one.... It all boils down to competitiveness.

    Unless a country is completely isolationist (which isn't going to happen since all the elites are building their new world order), eventually the mediocrity at best for the highest pay that Americans have enjoyed, just ain't gonna cut it anymore.

    Infact, with the levels of education, workmanship, taxation, regulation and other restraints on commerce and business allowing US based and owned companies to use US workers, expect to see just about all manufacturing, most service industry and a good portion of agriculture to just fade away to far off lands even more so, unless there's some cosmic event that undoes all those things that have brought the US to it's knees in the world markets.

  17. #17
    Tscott's Avatar
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    Well, I am with the No's on the tax issue. I believe that a truly free market will always regulate itself. I do realize we do not have a free market, but by enacting a tax like this you would make the market less free and would only further compromise the health of the system. By levying a tax on free enterprise you begin to become what you fight against.

    Something you all may want to think about, is that the US is actually a net importer when it comes to jobs. I know this sounds wrong because of all you hear in the media, but then again do you believe anything you here in the news anymore? The truth is that the US tends to outsource a lot of lower wage jobs, but we import many high tech jobs. This means that we actually import more jobs than we outsource. We are a very well educated country (contrary to what most believe) and the rest of the world looks to us for many things they cannot get in house.

    Finally, people don;t tend to realize that these countries we export these jobs to are growing. India is in the middle of an industrial revolution of their own. in 10 to 20 years they may have a lifestyle comparable to the average American family during the 70's. Remember that as lifestyle improves so do wages. Within My lifetime (I am 26) I am sure I will see countries like India and China going through the same problems that the US faces today. Won;t that be strange listening to news stories about how so many Indian jobs are being outsourced to some other BFE country.

    Just a few things to think about.

    Tom

    PS. I spend alot of effort trying to avoid having a Chicken Little view of the world. Sometimes it's tough but it seems to be working.

  18. #18
    MLB's Avatar
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    I'm a bit conflicted on this (and similar) issues. Protectionist, heavy handed government seems contradictory to our beloved free-market, but it seems to me that the primary function of the US government is to protect the American Citizen. Especially from foreign threats.

    While I do believe that competition is the prime motivator for improvement, reducing the American standard of living to that of the poorest country with telephones doesn't sound like it's in the best interests of the US of A.

  19. #19
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    You know, if the Fair Tax ever managed to get passed, this would be a moot point. If companies had their tax burden decreased, the jobs would find their way back to the U.S.

    And before you jump on me, do some checking. It makes perfect sense. Excessive taxation is one of the major reasons that jobs are being outsourced.

  20. #20
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    While lower taxes (assuming that a flat tax would be lower) would certainly be a benefit, I don't see how that helps equalize labor costs. If it costs $25/hr for labor here and $5 overseas, I don't see any hiring boom on the horizon.

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