Stop Complaining About Businesses Moving Abroad

Stop Complaining About Businesses Moving Abroad

Instead, do something: Make America’s tax rates and business climate competitive again.

Seriously?

The economy has been in the tank for six-plus years, unemployment plus underemployment (the U6 rate) is over 12 percent, and the nationalization of 17 percent of the economy via ObamaCare is a complete disaster.

Throw in the regulatory and economic disincentives imposed by the U.S. Department of Health and Human Services, via the numerous mandates and regulations it has imposed on employers, individuals, insurance companies, doctors, and hospitals; the Environmental Protection Agency, through imposed and threatened carbon emission restrictions; the Department of Labor’s attacks on U.S. corporations and attempts to stack the National Labor Relations Board; the constant delays in the Keystone Pipeline; and the Dodd-Frank law that manages to simultaneously impede and subsidize the financial services industry—and corporate offshoring is what I’m supposed to be losing sleep over?

Could people’s economic priorities be any more upside-down? Basic economics teaches us that if you subsidize something, you get more of it, and if you tax something, you get less of it.

Yet, the Obama administration has continually subsidized unemployment through endlessly extending unemployment insurance benefits, resulting in unusually high and lengthy levels of unemployment. Meanwhile, the administration raised personal income tax rates on our most productive earners, seriously retarding economic growth and suppressing investments in small business—the very business that employ the majority of Americans and fuel economic growth.

Yet, I’m supposed to be up in arms over a Brazilian-owned company merging with a Canadian company and moving their corporate headquarters to Canada (while still paying U.S. corporate income taxes)?

If liberals don’t want U.S. companies moving overseas, they should concentrate on international tax competition, not chastising publicly traded corporations for upholding their fiduciary responsibility to act in the best interests of their shareholders by relocating to more economically friendly environments.

Check Out the 1980s, Dude

One needs look no further than the tax competition in the 1980s and 1990s for evidence of the economic benefits of tax competition.

In 1991, Michigan was in dire straits. Its economy was in free-fall and deficits were predicted for the foreseeable future. But Michigan Gov. John Engler, a free-market proponent, was convinced that tax competition was the answer. The governor proceeded to cut taxes 30 times during the 1990s, providing a vastly improved economic environment for businesses and people alike.

The results were overwhelming. Between 1990 and 1996, unemployment in the state fell from 11 percent to 4.5 percent. The state budget went from $2 billion in the red in 1990 to a $1.1 billion surplus in 1996—the third largest in the country.

The correlation between a competitive tax regime and economic success continued in other states throughout the 1990s. For example, the ten states that significantly cut taxes during the ‘90s grew their economies nearly 25 percent faster than tax-raising states. Further, income for a family of four grew by $1,600 more in tax-cutting states than in tax-raising states.

The same held true for global tax competition in the 1980s. Following the Ronald Reagan and Margaret Thatcher tax cuts of the early ‘80s, many other nations of the industrialized world felt they had no choice but to cut their tax rates as well in order to remain competitive The end result was the worldwide economic boom of the 1980s.

Most reasonable people would conclude that tax competition is the key to America’s success in the global economy. But very few people would confuse our politicians in Washington with reasonable people. So, instead we get hysterical attacks on corporations making reasonable economic decisions to benefit their employees and shareholders.

Forget holding the pickles and onions, these folks should be “holding” their righteous indignation and concentrate on lowering our corporate and personal tax rates.

Now, if you don’t mind, I’m going to turn off my South Korean-made flatscreen TV, hop in my German-made car, and head to the local Burger King for a Whopper.

Eric V. Schlecht, a writer and consultant, has worked on budget and economic issues in Congress and Washington DC for more than 20 years.

Photo By: futureatlas.com
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