Bill on outsourced jobs fails Senate test

WASHINGTON (CNNMoney.com) -- As expected, a Senate bill designed to end tax breaks for U.S. companies that move jobs and manufacturing plants overseas failed a key test vote Tuesday.

With a 53-45 vote, Senate Republicans blocked a Democratic efforts to end debate and ultimately vote on a "jobs" bill.

Top Democrats have claimed the bill would help keep American jobs from going overseas. But when it came to the test vote, four Democrats voted with Republicans to block the bill.

Republicans have called it nothing more than a pre-election political ploy.

The bill came out of nowhere last week and wasn't discussed or debated, as a package, by any of the Senate's committees. It would have given companies a break on payroll taxes for new U.S. jobs that replace positions that had been based overseas.

The measure would have also reined in tax incentives for moving jobs outside the United States.

Democratic sources told CNN they knew all along this measure would not make it very far.

"The bill we tried to pass today is based on simple common sense: to keep American jobs here in America, we should stop forcing taxpayers in Nevada and across the nation to pay for giveaways that reward companies for sending American jobs overseas," said Senate Majority Leader Harry Reid in a statement.

The U.S. Chamber of Commerce opposed the bill saying it would hurt the economy and lead to job cuts. Republicans stuck together to filibuster the bill.

"Now, in the last three days of the session they decided they can pretend to be concerned. This is nothing short of patronizing," said Senate Republican leader Mitch McConnell of Kentucky. "This is about as pure a political exercise as you can get.

As they campaign to retain control of Congress in the Nov. 2 midterm election, Democrats have been hammering Republicans on the issue of tax breaks for companies that send jobs overseas.

Tax holiday: The Creating American Jobs and Ending Offshoring Act would have given U.S. employers a two-year break from payroll taxes on wages paid to new U.S. workers performing services in the United States, according to a summary of the legislation.

To be eligible, businesses would have had to certify that the U.S. employee is replacing an employee who had been performing similar duties overseas.

But experts said the amount of money companies could save as a result of the tax holiday may not be enough to offset the benefit hiring workers in cheaper labor markets.

Closing loopholes: The bill also aimed to discourage companies that ship jobs abroad by eliminating favorable tax rates.

Under the legislation, businesses would have been blocked from taking any deduction, loss or credit for costs related to reducing or ending U.S. operations while expanding similar operations outside of the United States.

The bill would have also changed current tax laws that allow companies to defer paying U.S. tax on income earned overseas until the profits are brought back to the United States.

Jennifer Liberto is a senior writer at CNNMoney. Dana Bash is senior congressional correspondent at CNN.

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