Senate Republicans blocked a bill on Tuesday that would have denied tax breaks to companies that move jobs offshore and provide companies with a two-year holiday from their share of Social Security payroll tax withholding for each employee they hire to replace a worker at a foreign-based facility.

Charles Grassley

The bill, introduced last week by Senate Majority Whip Dick Durbin, D-Ill., and co-sponsored by Senate Majority Leader Harry Reid, D-Nev., Byron Dorgan, D-N.D., and Charles Schumer, D-N.Y., is called the Creating American Jobs and Ending Offshoring Act (see Senate Debates Bill to Discourage Offshoring). The bill would bar companies from taking tax credits or deductions for closing a U.S.-based facility to move the operation overseas, but they would still be able to take deductions for severance and job placement services for employees who lose their jobs from a U.S. plant closing.

It would prohibit a firm from taking any deduction, loss or credit for amounts paid in connection with reducing or ending the operation of a trade or business in the U.S., and starting or expanding a similar trade or business overseas.

The bill would also prevent U.S. companies from deferring the payment of U.S. taxes on income earned by their foreign subsidiaries until that income is brought back to the United States. The bill would repeal deferral for companies that reduce or close a trade or business in the U.S., and start or expand a similar business overseas for the purpose of importing their products for sale in the United States. U.S. companies that locate facilities abroad in order to sell their products overseas would be unaffected by the law, however.

Republicans objected that the law would raise taxes on large U.S. companies. Four Democrats and one independent (Max Baucus of Montana, Ben Nelson of Nebraska, Jon Tester of Montana, Mark Warner of Virginia and Joe Lieberman of Connecticut) joined Republicans in a 53-45 vote that prevented the bill from overcoming a filibuster. The bill probably will not be taken up again until after the midterm election in November. Some Republican amendments were also blocked.

Senate Finance Committee ranking Republican member Charles Grassley, R-Iowa, said that the blocking of two amendments he had introduced during debate on the Reid-Durbin-Dorgan legislation revealed that consideration of the overall bill was motivated by politics rather than policy.

Grassley filed two amendments to try to make sure qualified American workers are first in line for job openings.  His first amendment would have prevented any company engaged in a mass lay-off of American workers from importing cheaper labor from abroad through temporary guest worker programs. The second would have taken aim at fraud and abuse of the H-1B and L Visa programs, while making sure Americans have the first chance at high-skilled jobs in the United States. Both amendments were blocked by Senate Majority Leader Harry Reid, D-Nev., Grassley contended.

“Despite the number of Americans without a job, companies are still allowed to import thousands of foreign workers with little or no strings attached,” Grassley said. “My amendments would make it possible for qualified Americans to fill the vacant positions first.”