Proposed HIRE Act Slaps 25% Tax on Outsourcing, Funds New Domestic Job Training

The newly proposed Halting International Relocation of Employment Act—or the HIRE Act—is a major attempt to hit companies where it hurts when they move certain jobs overseas. Starting in 2026, the bill introduces a steep 25% excise tax on payments made by U.S. businesses to foreign entities for services that ultimately benefit customers here in the United States. Think of it this way: if a tech company here pays a call center or a software development firm abroad to handle work for its American customers, 25% of that payment is now going straight to the IRS as a tax.

The Double Whammy: Taxed and Undeductible

This isn’t just a new tax; it’s a policy designed to make outsourcing significantly more expensive. Currently, when a business pays for services, that payment is usually a deductible expense, meaning it lowers the company’s taxable income. The HIRE Act changes this in two ways: first, there’s the 25% excise tax (Section 2). Second, the bill explicitly states that the business cannot deduct the original outsourcing payment itself from its income taxes (Section 4). For a company relying on foreign services, this double penalty—paying a 25% tax and losing the ability to deduct the expense—could easily make the cost of foreign labor higher than hiring domestically. This is a direct financial mandate pushing companies to keep jobs within the U.S. borders.

Who Pays the Price? (And Why You Should Care)

For the average consumer, the big question is whether companies will absorb this new cost or pass it along. If a bank, for example, is now paying 25% more for its foreign customer support or IT services, it might raise fees or service costs to cover the difference. This means that while the bill aims to protect U.S. jobs, it could also contribute to higher prices for everything from software subscriptions to banking services. Furthermore, corporate officers face new rules, including having to certify the nature of these payments under penalty of perjury, which adds a layer of serious personal risk and compliance burden.

The Domestic Workforce Fund: Where the Money Goes

One of the most interesting aspects of the HIRE Act is what happens to the money collected. All revenue from this new 25% tax, along with related penalties, is earmarked for a brand-new account called the Domestic Workforce Fund (Section 3). This fund is designed to be spent immediately—without needing further Congressional approval—on programs aimed at boosting American employment. Specifically, the money will fund workforce development, retraining programs, and apprenticeship grants focused on industries that have lost jobs to outsourcing. So, the money collected from companies sending work abroad is directly reinvested into training American workers to fill those exact roles here at home. This creates a dedicated, self-sustaining pipeline for domestic job creation.

The Fine Print and the Enforcement Stick

While the goal is clear—bring jobs back—the implementation details are tricky. The bill gives the Treasury Secretary power to issue guidance to prevent companies from using tricky accounting or related-party transactions to skirt the tax. Crucially, the penalty for failing to pay this new outsourcing tax is severe: instead of the standard small percentage, the failure-to-pay penalty under this act jumps to 50% for the first month alone (Section 2). That’s not a slap on the wrist; that’s a major deterrent designed to ensure compliance right out of the gate. For busy professionals and small business owners who use any kind of contracted foreign service (think specialized coding, back-office processing, or design work), understanding whether their payments qualify as “outsourcing payments” benefiting U.S. customers will be critical starting in 2026.