Tax Impact of Offshore

By Larry Dignan  |  Posted 2003-09-05 Print this article Print

Outsourcing"> Singh says his estimate is likely conservative. The middle class—broadly defined as those earning between $35,000 and $75,000, based on U.S. Census statistics—occupies 33.8% of the population. Citizens making more than $75,000 occupy 24.6% of the population with 41.6% falling below $35,000.

The tax impact could also be larger as higher-quality jobs move offshore. Forrester Research projects 288,281 manager jobs moving offshore by 2015, up from 37,477 in 2005 and zero in 2000. Computer jobs will migrate to the tune of 348,028 by 2015. Advocates for offshore outsourcing say any tax hit will be temporary—based on the belief that permanently displaced employees will find new careers. "You can see the creative destruction," says Cadence Design Systems CEO Ray Bingham. "Its the continuous flow that drives the U.S. economy. In the intermediate term therell be displacement, but itll be a net positive for the economy."

That outlook, however, doesnt factor in costs such as unemployment insurance, which will cost the government money, and tuition bills to retool skills.

Ronil Hira, associate professor at the Rochester Institute of Technology, says the short-term tax hit should be examined. "I think the short term matters," says Hira, who adds that these displaced workers are also consumers who will buy other goods and services.

Bottom line: No one knows what the ultimate tax hit will be. Statistics on how many manufacturing jobs have been lost and whether those workers are permanently underemployed arent available. Experts say an ideal statistic would track a technology employee who lost his job due to offshore replacement; and how long it takes that person to regain the previous salary level.

That statistic, however, doesnt exist.

Business Editor
Larry formerly served as the East Coast news editor and Finance Editor at CNET Prior to that, he was editor of Ziff Davis Inter@ctive Investor, which was, according to Barron's, a Top-10 financial site in the late 1990s. Larry has covered the technology and financial services industry since 1995, publishing articles in, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism.

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