We have some devs in other countries. We pay them about $80K/yr. We have been trying to hire locally. The positions have been advertised for about 6 months at $140K/yr. We have only had unqualified people apply so far. We then bumped the salary to $160K. Still no go.
Again, we get takers, but they can't match the skill level of overseas devs at double the salary.
Will we pay the 20% tax/fine? Grudgingly yes. Particularly if this stuff becomes law and local labor force becomes even more expensive than it is now.
I can also see people coming up with creative ways to circumvent having to pay the tax. It is possible that some companies will move out entirely or create a legally separate entity offshore that is responsible for all the work that they wish to outsource.
The same sort of thing happened with manufacturing jobs. You can wish for those jobs to come back all you want. It is not happening in any significant numbers.
I am highly skeptical that there are no US applicants that can do the job and accept $160k TC. I think you guys just enjoy the wage arbitrage and this is an inherit bias in your hiring process.
In cybersecurity and DevSecOps it's a very common occurrence.
It's very hard to find software engineers and PMs with a security background in the US, which makes delivery difficult, while in countries abroad, finding a candidate who has a background in eBPF, OS internals, computer hardware, networking, C/C++, and CloudOps/DevOps topics like K8s or IAM all at once is fairly easy to find.
Since the mid-2010s, American CS programs have increasingly dropped OS, CompArch, and Networking classes or provide a single summary class that most students promptly forget after the class is complete, because LeetCode-driven hiring simply didn't incentivize this kind of knowledge.
Meanwhile, in Israel, Romania, India, and Poland, these skills are fairly table stakes requirements in a CS degree. You see this reflected in Cybersecurity startups as well - almost all early stage startups in the space are now Israeli or Indian founded, with either a small office of diaspora in the Bay or in the old country.
It's even worse on the chip design side, because the salaries in the field are low in the US ($80-110k), margins are low in the industry being hardware based, AND students increasingly don't take Computer Design, Circuits, DSP, and Logic Design because CS is increasingly segregated from ECE, and EE/CE enrollment is falling. Meanwhile, a course like DSP is made a CS requirement as well as an EE requirement in India, China, Israel, and Eastern Europe
If you can't find a qualified candidate at 160K/year, the problem isn't the candidate... It's your company and your interview process. There are many places in the US where you could find that person, especially now with so many people in our field still unemployed.
I would say that's fine. The law can do two things, incentivizes you to try to hire locally, and if you can't, prop up the tax payer coffins with a 25% tax, then maybe use that to generate other jobs, provide services, etc.
The more important question is if it will hurt the economy in the area. So your mentions of bypassing it, companies leaving to go elsewhere, and so on.
Personally, I think it would make more sense to tax companies that want to sell in Ohio, and offer tax credit to those who also employ in it. Though it's hard to predict how any such idea would play out. Otherwise it seems to hurt local companies the most as their cost to compete goes higher.
Let me guess the candidate has to agree to live in one of the most expensive cities on the planet and dodge knife wielding homeless people and their feces on the way to work every day.
>Will we pay the 20% tax/fine? Grudgingly yes. Particularly if this stuff becomes law and local labor force becomes even more expensive than it is now.
This is the point. They could just BAN outsourcing. But letting it just be more expensive is a compromise to allow companies to find people when overseas is the only way to do it.
>The same sort of thing happened with manufacturing jobs. You can wish for those jobs to come back all you want. It is not happening in any significant numbers.
If the tariffs stick, and get set to a sufficiently high rate, then the jobs will come back. In the meantime, investors are scared to be screwed over on new factories in the US which would be uncompetitive without tariffs.
If you hire someone to train them, you can pay less (say perhaps $70-80k) and also include in the contract some penalties if they stay a specific amount of time, say longer than 6 months and less than 2 years. And the so-called training is probably bullshit anyway. The problem here is probably not the pool of candidates. It's probably the wage not matching the market, the location of the gig, the gig itself, or the company being too picky.
Training would perhaps be at 50K/yr USD in current environment, and it would be not too many taking up in US environments. In developing nations you can get equivalent training talent at 10K USD/yr, and equivalent fully-trained at 50-80k USD/yr en-mass.
IMO, the barrier to entry for battery and power systems manufacturing has been Capex moreso than the IP.
Innovating new battery chemistries or a new BMS is hard, but cell, module, and pack assembly is fairly straightforward.
Basically, my opinion is our blocker in the space wasn't lack of IP or domain knowledge, but the extremely high upfront costs to start, which is what IRA helped remediate.
With significant portions of the tech industry, it's the other way around - we may have coders, but we increasingly don't have the domestic domain experience at the entry and mid-level.
Absolutely - and I'm a big booster of industrial policy a la CHIPS/IRA!
But a CHIPS or IRA style policy wouldn't work if trying to bring services or IP-first industries back to the US. In my vertical (cybersecurity/DevSecOps) much of the domain experience has been hollowed out domestically for almost 10-15 years now.
If you're offshoring for the sake of R&D and IP generation, cost isn't a significant pressure (eg. Top Cybersecurity talent in Israel can demand US level salaries, and similar talent in India can demand EU level salaries).
There's a much larger pipeline and skills problem in several subdomains in the tech industry that are highly underestimated by HNers.
> I can also see people coming up with creative ways to circumvent having to pay the tax.
Oh it won't take long if some company with deep pockets wants out of this. An 'exemption category' will be quietly put in and those who paid the right people will qualify. This is Trumpinomics now at the state level; put out harsh new rules and then let people pay you off to get exempted from them.
- 25% is not enough to matter if you drop from 130k US engineer to a 40-50k outsourced
- International corporation will easily side step that since the US Corp is not paying for salaries to the foreign Corp, just dues to exploit the IP at best
So at best this would be hurtful to smaller businesses like the stupid section 174.
Not to distract from the point you're making, but over here in <outsourcing destination> 50k is a lowball offer - at least for people with more than around seven years in the industry.
It is brazenly unequal. If your company makes things for 5e international markets, and you employ international production staff, you now have to separate things you do for US consumers and things you do for non-US consumers to figure out how much of this tax you should pay, it’s an accounting nightmare, especially if you ship the same product to Us and non-US consumers. More so, your non-US competitors can still ship product to US consumers without being subject to the tax, and other companies might retaliate with a tax on US labor that targets their own market, because why not?
the realistic best you can do for a quality outsourced engineer is $80k. Good ones go for $100k, and you can easily, easily get junior devs for that price. You can even get decent U.S. engineers for $125k outside of HCOL places.
Realistically if they are doing 20% of their US business in say Vermont, they should have to employ 20% of their workforce there. 15% in California? 15% of US head count in California. All they do is extract and hide the money. That needs to stop. Don't want to? Well your competition and new entrants will.
So if you're doing B2B business primarily within the US, you have to hire/fire a bunch of employees in different states every time you sign a new contract? That sounds incredibly burdensome.
There are singular companies doing extremely specialized work for entities all over the country, so this kind of logic is not going to work. It would be more realistic (but similarly problematic) to apply the logic on a national level. But what that would look like is the government issuing licenses to import based on the percentage of the company's output made domestically. That is complex to figure out, as well, and not all products are made entirely in one country. Even if they can be made all in one country, it may not be what you want your countrymen working on. I would rather see my people make cars than, say, squeaky dog toys. But some of the same skills can be used for a variety of different products too.
By this logic, if a single person in Romania purchases a product from me, I must hire someone in Romania or else the transaction is unethical? Immoral?
If I only need 10 developers to make some software and sell it globally why should I have to hire more people?
An "outsourcing payment" is defined as "any premium, fee, royalty, service charge, or other payment made...to a foreign person...to labor or services the benefit of which is directed, directly or indirectly, to consumers located in the United States."
That exempts B2B. It doesn't have a border-adjustment charge, so any country tariffed less than 25% can undercut American businesses. And it weirdly doesn't use the words wage, employee or employer, which would mean a lot of consumer purchases would be covered, from airline tickets to Spotify charges.
So this only applies to American companies? So I’d a German company decides to use Indian labor to do something for US consumers, they avoid the tax, but Facebook or Google would pay it. Since these companies also have international markets for their products, how would Apple figure out how much of their iPhone work is for US consumers and how much isn’t?
2. How would this work for subsidiaries or JVs? For example, when Google opens it's umpteenth office in India, it's part of a separate entity called Google India Pvt Ltd.
The core questions are: Why does a company want to be a US company and why would companies want to hire US employees? With those two lenses in place does this help? The first one is a clear 'no', this makes companies not want to be US companies. For the second one it does give some reason but as others have pointed out, giving incentives and not penalties is generally a better way to do things since that doesn't remove a company's incentive to be a US company and gives them a reason to want to hire local. Similarly, ensuring the workforce is capable and competitive would be a better response because those give clear 'yes' answers to the two questions. Maybe invest in education instead of driving companies away with penalties? Nah. That's crazy.
As a Scottish former founder with a bunch of founder mates outside the US:
> Why does a company want to be a US company
A big part of this is “they want investment from US VCs which demand it”.
Stripe Atlas and co. have made it easier and more popular than ever to have a US entity and e.g. Scottish entity and hire your engineering staff in the latter.
Sounds like this may or may not be hit by this tax but it’d still be way cheaper to pay it given how much cheaper devs are over here.
I'm not a lawyer, but doesn't it applies to services you buy too? Like of, god forbid, a US company pay for SAP, it'll be 25% too? or if you pay for spotify when apple Music exist, it'll be a 25% surcharge?
I think there could be a case for a fixed amount of annual tax credit for each US citizen that is employed by a company - since presumably that person is not on the government payroll or on benefits so the US government is saving money.
The big plus is business owners love claiming tax credits. You would not really need that much paperwork or auditing as far as I can tell since you have every US employees tax info already versus trying to monitor/regulate "outsourcing".
More and more parallels to Peronist econ are emerging in the US. All that is missing is a rationalization of taxes on exports. Both sides of the aisle seem opposed to laissez-faire liberalism.
Perhaps it isn't as popular as some tropes would suggest. Those who would buy influence would prefer state interventions in the market to benefit their interests, rather than an open playing field. The best way to sell those interventions to the public might be appeals towards "fairness" and the aforementioned tropes.
It sounded like you were saying regulatory capture is better than an open market for established players, but I’m saying I think when you hold all the cards being allowed to do whatever you want is even better.
Ridiculous of its face. I am part of a multi-national organization. We have offices in 92 countries, and business in 118, with R&D in the US and all over the world. Who is outsourcing to whom, exactly? What is outsourcing, really?
They circulate in the global economy and since they're denominated in USD at some point the most efficient use is to buy American products with them. What goes around comes around.
Plus, the senators consumers got access to cheaper goods and services. Jobs are not the only determinant of benefit to America.
we're not rich, we do not buy many american products.
most of the money goes into mortgage, food, school for the kids, and occasional local family trips. that's the bulk of my spending.
in my case i have a 6yo android phone, a 6yo benq monitor, a recent (2024) mac mini and some indie steam games. i do not own anything else american. i do pay for youtube premium and a netflix family account and do use amazon to buy non-american products.
a small part goes into retirement funds with a smaller part from that going to back to america.
the us runs a big trade deficit with my country so that money is not really seeing back the american shores but the part that is definitely does not head to the american people. increasing inequality mechanics imply it's proportionally more and more funneled and concentrated into the elite (stocks&bonds, rent-seeking "post"-capitalism, lobbying, fiscal optimization etc.).
When you deposit those USD, pay that mortgage, having received local currency as pay, to get you that local currency, or convert the USD INTO local currency, somebody wound up with USD. What does that somebody do with it?
Those stocks and bonds, those rent seeking post capitalism entities, they don't just sit on piles of USD like smaug. They have to do something with it. What do you do with USD?
These "giant trade deficits" are not the problem the current US government thinks they are. They aren't that giant. In any event, repatriating US jobs isn't going to "fix" whatever ails America.
> somebody wound up with USD. What does that somebody do with it?
the bank will get usd, aaand will probably put it into stocks/bonds/whatever financial instrument. in other things it will fund national debts.
so that's part government money, part investment money for big business.
with current government/finance policies it directly goes to feed the inequality wheel.
there are many aspects to that (tax-breaks, inflation policies, job market elasticity etc.) but the end result is the inequality is increasing and shows no sign of stopping, and that money that goes out from the bottom - in the form of less salary paid and more unemployment (leading into lower salaries) - and back through the top - national debt/big investment - is not helping.
i am not saying national debt/big corp. is inherently bad for inequality (i wouldn't know.. it s a complex topic) but i am saying that the current way they choose to spend money leads to it.
i'm not complaining, i'm on the poor side that receives usd. but i say it as i see it.
i'm not an expert, just a grunt coder wanting to start a business soon, but i try to keep informed.
> any money paid by a U.S. company or taxpayer to a foreign person whose work benefits U.S. consumers.
How on earth is this going to defined and enforced? Isn't anything and everything shipped from overseas to the US, physically or electronically, "benefiting US consumers"?
The term 'outsourcing payment' means any premium, fee, royalty, service charge, or other payment made —
“(A) in the course of a trade or business,
“(B) to a foreign person, and
“(C) with respect to labor or services the benefit of which is directed, directly or indirectly, to consumers located in the United States.
...
(c) FOREIGN PERSON. — For purposes of this section, the term 'foreign person' means any person who is not a United States person, except that such term shall not include any corporation or partnership which is organized under the laws of a possession of the United States.
Note that goods are excluded, which is the only sliver of sanity in this whole thing, although it's also a loophole big enough to drive a truck through: if I get my favorite Indian outsourcing company to build me a Web app and ship it by USB drive, did I just avoid the tax?
In any case, enforcement will be by requiring everybody who files tax returns to self-report under threat of perjury:
c) REPORTING. — The Secretary of the Treasury, or the Secretary's delegate, may —
(1) require United States persons making payments to foreign persons (as defined in section 5000E of the Internal Revenue Code of 1986, as added by subsection (a)) to file a return of tax under section 5000E of such Code or to file an information return concerning such payments, which may include —
(A) information on whether such payments are outsourcing payments (as defined in section 5000E of such Code), and
(B) such other information concerning such payment as the Secretary may reasonably require to enforce the amendments made by this section, and
(2) require the officers of any corporation to certify on such return, under penalty of perjury, the character of such payments.
They're going for gut reactions by people who are either incapable of or choose not to use second-order thinking. It's all about the gut -- if you look deeper, you're a lousy ivory tower liberal, yadda yadda.
What if I told you, this is already enforced in the form of tax withholding (W8-BEN) but it only affects a few countries that are considered "tax heavens".
Enforcement is easy: You enforce at the point of "exit of money". Banks can do this enforcement or at least inform the relevant authorities about certain transactions.
Again, we get takers, but they can't match the skill level of overseas devs at double the salary.
Will we pay the 20% tax/fine? Grudgingly yes. Particularly if this stuff becomes law and local labor force becomes even more expensive than it is now.
I can also see people coming up with creative ways to circumvent having to pay the tax. It is possible that some companies will move out entirely or create a legally separate entity offshore that is responsible for all the work that they wish to outsource.
The same sort of thing happened with manufacturing jobs. You can wish for those jobs to come back all you want. It is not happening in any significant numbers.