Bringing Jobs Back to America
It’s election season, which always means two things: a spirited debate about the direction of our country and a burning desire for the political ads to stop. In less than two weeks when we leave the voting booths, the ads will come to a screeching halt. What will remain are the decisions that need to be made about the issues facing our country. One such issue that received some attention in the last town hall debate was the notion of how to bring jobs and manufacturing back to this country.
Companies have been sourcing goods overseas for many years. However, the trend of countries changing their country of incorporation in order to reduce their tax and other burdens is somewhat newer, but just as troubling. The sad truth is that the U.S. is not the most attractive environment in the world in which to conduct business. One of our great disadvantages is taxes. One-liners about taxes are oversimplified because tax codes are so incredibly complex. Having said that, if U.S. corporate tax rates are not the very highest in the world, they’re leaning at the tape in that race. Our neighbor, Canada, boasts a reasonable 15% corporate tax rate, compared to our 35% rate.
Regardless of how well it plays in campaign speeches, you can’t punish companies into staying in this country if the economics are slanted against doing so. With so many companies having moved operations and even corporate headquarters overseas, a lot of the stigma has gone out of making that move. Unless the environment here is made to be more attractive than elsewhere, the rate of departures will only increase.
In the door and window industry, we’ve seen this in the solid merger and acquisition activity in California and New York over time but the dearth of plant expansions in those states. Buyers are willing to acquire established, successful companies in California or New York. However, when companies are expanding a plant to serve those regions, they more often choose to expand in surrounding states that have more pro-business climates. Those states should address this problem, but not by enacting penalties on companies that choose not to expand there. Rather, they should focus on lowering corporate taxes and regulations and making the area more attractive to businesses.
Hopefully, whoever is in office the next four years will do the same.