The process of going overseas for various functions of an industry is done for many reasons, and the reasons change with the industry. I doubt if tax breaks are a major driver--income from overseas operations are taxed like any other income.

I do know companies who actually completely relocate overseas (as opposed to just offshoring functions) can get tax breaks from countries that don't penalize such activity as much as we do. Ireland, for one, has long had a benevolent tax environment to attract businesses.

I think most of it is that costs are just lower. This is particularly true of industries that move information. It costs a company almost nothing extra to work with an information worker in India compared to one in the U.S.

There are a hell of a lot of smart people with intense work ethics out there willing and able to work for less than some Americans are. That's a lot of market pressure. We could pass laws to keep U.S. companies from reducing their costs this way, but then companies from other countries would just fill the gap and underprice us around the world anyway.

As countries like India raise their living standards, the wage gap starts to close, and the incentives start to drain away. I remember when Japan was where all the cheap crap was made. They became a first-world nation, and now the crap is made in China. But even now, China is starting to get more expensive. At some point, a balance is reached. Unfortunately, I think that balance is going to be at a lower level than the American blue-collar worker of the last half of the 20th century is used to. The auto industry and others are working through this change with some difficulty.

American labor had a Golden Age after WWII. There was basically no other fully-intact industrial nation left, and we had a near-monopoly on a lot of the world's advanced production. Competition was non-existent, as was the idea of "imported oil." In 1950, you could probably have made a list of major imported consumer items on two pages.

Through natural recovery and evolution of the nations of the world after the war, this has faded out. And although they will try to convince you otherwise, there really isn't much our political leaders of any party can do about it. It's not a bad thing when you look at the big picture--we might be having some difficulty adapting, but around the world, billions of people who used to live starvation existences are improving their lives.

I hope this helps a little. It's a hugely complicated picture. There's a lot of research out there on this, but I'm having difficulty finding something I consider objective enough and broad enough for your needs.