Senate Republicans successfully blocked the passage of an anti-offshoring bill that would have denied tax breaks to US companies which move jobs overseas.
Republicans in a 53-45 vote prevented the bill from overcoming a filibuster. At least 60 votes were needed to overcome the Opposition's obstruction.
According to the bill, there will be a ban on government contractors from using American taxpayers' money to move jobs offshore.
What is seen as an electoral populist move, the Creating American Jobs and End Offshoring Act aims at small manufacturers and included a payroll tax exemption for firms that move jobs to US, but the bill also contains provisions to prevent businesses from deferring US taxes on the income they make from foreign subsidiaries.
Indian IT honchos had said the bill won't make much of an impact on India. However, they warned that US companies operating in other countries may be beaten by the same stick.
Several business groups such as the National Association of Manufacturers (NAM) were strongly opposed to the legislation. It had sent a letter to senators arguing the measure would make US corporations less competitive and hurt job creation.
Terming the bill as an election gimmick, Republican senator Orrin Hatch slammed the Democrats for their "height of irresponsibility" that would put the US economy at "greater risk."
"Desperate times call for desperate measures and the majority is showing how desperate they are with a bill that increases the tax burden on job creators and ship much-needed US jobs overseas."
Hatch feared that "raising taxes on companies' overseas profits will just incentivize them to move their domestic facilities to another country... That is not the prescription that will cure our ailing economy."
Agreeing with Hatch, senator Chuck Grassley said the bill would have resulted in a net decrease in American jobs.
"The legislation that was defeated in the senate today would make US companies pay an extra tax, of up to 35 per cent, compared to foreign competitors, and really hit companies like John Deere, where they have big overseas markets."
The senator said that the reality of "consequences for manufacturing jobs" in the US was cast aside to create a debate for "political demagoguery."
Meanwhile, frustrated after the bill faltered, a Democrat senator Harry Reid said, "The bill we tried to pass today is based on simple common sense: to keep American jobs here in America... but Republicans continued their job-killing agenda today by protecting these tax breaks for CEOs who offshore American jobs."
The majority senator claimed that Republican policies have cost 8 million Americans their jobs. "We should stop forcing taxpayers in Nevada and across the nation to pay for giveaways that reward companies for sending American jobs overseas."
--with inputs from PTI