Collins
by Mike Collins
October 22nd, 2012

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.



2 comments
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  1. Hold on there brother. I happen to have been in business in Canada for the past 27 years and believe me when I say that we’ve never had a coporate tax rate lower than it is today at 25% (where do I move to for 15%). In fact Canadian tax rates have been consistently higher that the U.S. not unlike our personal tax rates. How do you think we pay for that health care anyway. Personal income tax rates in B.C. rise to 43% once you earn as little as $60,000, and dividend are taxed at 30%, not even close to as low as those in the U.S. Furthermore, recent studies have shown that although U.Sl corporate tax rates are often quoted at 35%, after the numerous allowable deductions, the net rate is typically 25%, just like us up north but we’re just getting that low after years of abuse. I mean really, have you ever heard of anyone moving to Canada for the “low” tax’s? I only wish it were true.

  2. John,
    First and foremost, thanks for reading my blog. I’m by no means an expert on taxes, Canadian or otherwise, but I would point you to the passage below, which was taken from a website called Business Tax Canada (www.canadabusinesstax.com). That being said, I wasn’t painting a picture of the overall tax burden in Canada. You correctly point out that the overall tax burden is likely a better example of “how not to” than one that will attract droves of businesses there.
    Thanks again,
    Mike Collins

    Corporate Income Tax Rates Canada

    Effective January 1, 2011 the corporate income tax rate falls to 16.5% from 18% of 2010 corporate income tax rate. Yearly tax reductions will see the corporate income tax rate fall to 15% as of January 1, 2012. These corporate income tax reductions, says the Department of Finance Canada, will give Canadian corporations the lowest tax rate on new business investment in the Group of Seven (G7) by 2011 and the lowest statutory tax rate in the G7 by 2012.

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