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A Project of The Annenberg Public Policy Center

A Little Ditty ‘Bout Taxes and Trade

The Obama-Biden campaign has released a radio ad in Indiana featuring favorite native son John Mellencamp. In the ad, Mellencamp says, “John McCain will keep giving tax breaks to companies shipping American jobs overseas.”

Mellencamp is referring to an aspect of the tax code that allows companies to skirt paying U.S. corporate taxes on profits they make overseas and leave overseas. But economists have consistently said this tax provision isn’t a major reason jobs are being sent abroad. We’ve given a fuller explanation before, noting that a 2005 report by the Government Accountability Office said there were many contributing factors to offshoring, including global technological advancement, increased openness of countries such as China and India, higher education levels of foreign workers in technological fields, and cheaper labor abroad.

Obama has brought up this charge several times, and John Kerry in 2004 also used it as a line of attack against George Bush.

To hear Mellencamp’s call for changes to come around real soon, click the link below: