Democratic presidential candidate John Kerry has proposed major reform to the U.S. corporate tax code aimed at encouraging U.S. multinational companies to shift more investment and employment to the United States.

In March 26 remarks in Detroit, Kerry said that as president he would aim to tax U.S. businesses operating abroad at the same rate as businesses operating in the United States.

Under the present tax code U.S. companies can defer taxes on their foreign subsidiary earnings until those earnings are "repatriated," or sent to the U.S. parent company, which is sometimes a decade or more.

He said he would at the same time propose cutting the corporate tax rate by 5 percent, from 35 to 33.25 percent.

Kerry, a U.S. senator from Massachusetts, is the presumed Democratic nominee to run against President Bush in the November election. His Detroit remarks give foreign audiences a glance at his ideas on international economic policy.

He said the elimination of the foreign tax deferrals would not apply to U.S. companies that locate production abroad in order to sell abroad but would apply to production abroad for export to the United States.

"If a company is torn between creating jobs here or overseas, we now have a tax code that tells you to go overseas," Kerry said. "That's crazy. And if I am president, it will end."

Outsourcing, or the relocation of jobs abroad for work previously done in the United States, has become a hot election-year issue since publication of the Bush administration's Economic Report of the President, which praised the practice as contributing to long-term prosperity -- an idea supported by many, if not most, economists.

Besides a corporate tax cut, Kerry said he would use the additional revenue from eliminating tax deferrals to provide credits to U.S. companies for creating jobs.

Kerry also accused the Bush administration of weakness in enforcing trade agreements.

Our Jobs First economic plan will end laws that encourage companies to export jobs while plowing back every dollar we save into new incentives to help companies create and keep jobs in America.

We now have a tax code that does more to reward companies for moving overseas than it does to reward them for creating jobs here in America. So if I am elected President, I will fight for the most sweeping international tax law reform in forty years -- a plan to replace tax incentives to take jobs offshore with new incentives for job creation on our own shores.

Let me explain.

Today in America if a company is trying to choose between locating a factory in Michigan or Malaysia, our tax code has a feature called "deferral" that provides major tax savings if they locate abroad. So companies are driven to take advantage of legal tax incentives that have been on the books for too long and do not serve the economic interests of our nation.

A company with $10 million in profits in Michigan will pay taxes at the standard corporate tax rate; but if that company moves to Malaysia and makes that same $10 million in profits, they can avoid paying U.S. taxes -- perhaps forever -- as long as they keep the money overseas. They have a special tax incentive to send jobs overseas that may have little or nothing to do with normal market or economic forces.

The reform I'm proposing today is based on a simple principle: Money made by American businesses overseas should be taxed at the same rate as money made by businesses here at home. This won't affect American companies that locate production or serves in a foreign country to sell to consumers in that country. But it will apply to those who use those foreign locations to export products back to the United States or to other nations. If a company is torn between creating jobs here or overseas, we now have a tax code that tells you to go overseas. That's crazy. And if I am President, it will end.

The fact is that, taken together, the companies taking advantage of the current tax laws don't pay a dollar in taxes. We actually end up paying them $8 billion a year to send their money and ship our jobs overseas. My proposal offers American companies a reasonable transition to adapt to this sweeping change. I don't want to punish anyone. But I believe it is long past time that we put our jobs first and put tax benefits that discourage jobs in America out of business.

And I also propose to use the money we save from ending this tax giveaway for outsourcing to finance smart tax cuts that will create jobs here in America.

Last August, I proposed a new jobs credit that would give manufacturers a break on the payroll taxes for every new worker they hire. I believe we should expand it to industries outside manufacturing where jobs are endangered by outsourcing -- so that we help create more jobs, whether it comes to cars or computer software or call centers.

Second, the savings from ending the tax incentives for outsourcing can also expand jobs tax credit to cover all small businesses and their employees. For most small business owners, that means that if they create jobs, they will pay lower taxes in a Kerry Administration than they do under President Bush.

Third, savings can finance a 25-percent tax credit for small businesses when they provide health care for their workers. The rise in health care costs under this Administration has hit everyone hard, but no one harder than small business owners and their employees. As the Chair of the Small Business committee in the Senate, I saw again and again how small businesses can be the engine of job creation -- and those jobs are the ones most likely to be created here and to stay here.

Fourth, if we are willing to close loopholes and abuses in our tax system, then we can afford to lower taxes in the right way to spur growth and jobs. With the savings I proposed today, we can and should reduce the corporate tax rates by 5 percent -- to improve competitiveness and to narrow the difference between corporate tax rates here and overseas. Some may be surprised to hear a Democrat calling for lower corporate tax rates. The fact is, I don't care about the old debates. I care about getting the job done and about creating jobs in America.

Finally, I won't let America wage the fight for our economic future with one hand tied behind our back. No one should misunderstand me: I am not protectionist -- but I am a competitor. American workers are the most competitive in the world -- and they deserve a government that's as competitive as they are. We will demand our trading partners play by the rules they've agreed to and show them that America means business when it comes to enforcing our trade agreements. The Bush Administration has refused to enforce our trade agreements. That not only costs jobs; over time, it threatens to erode support for open markets and a growing global economy. And it deprives us of one of the most important tools we have to safeguard our own workers and our environment -- and to raise standards internationally.

As President, I'll hold countries like China accountable when they manipulate their currency to inflate their exports and depress ours. Four years ago, in the Senate, we fought for and won a provision to prevent Chinese companies from flooding the American market and destroying American jobs. Three times a bipartisan, independent commission recommended to President Bush that he use this power to aid American workers. And three times, this President has said "no." Just a few months ago, the Administration said they opposed efforts to increase the funds for enforcing trade agreements with China. They said the money just was "unnecessary." I'll tell you what is necessary -- a President who understands that open trade is essential for our prosperity, but unfair trade practices can undermine it.

It is time to insist on and enforce real worker and environmental provisions in the core of every trade agreement so that we don't exploit workers in other countries or sell them out here at home. And it's time to break the deadlock in Congress and pass real tax breaks for our manufacturing industries.

For the vast majority of companies in America -- 99 percent -- our Jobs First plan will cut their taxes and help them create new jobs. Some companies -- that benefit from tax loopholes -- will fiercely defend the status quo. I know how tough their lobbying will be. But I believe that's why we have elections in America -- so that the people can set us on a new course. And I don't believe the course they want is to subsidize the loss of their own jobs. I have fought for my country for 35 years - and I am ready for this fight. With tax reform and tax cuts, with real fiscal responsibility, with new investments in the industries of the future, we can and will create 10 million new jobs for America -- and lead our economy in a new direction. Together, let's give America back its prosperity and its future.