New Cost Study: US "Falling Further Behind"
By Pat Cleary Posted in Economy — Comments (16) / Email this page » / Leave a comment »
We released a study three years ago that showed we had a 22% non-wage cost disadvantage vs. our major trading partners. No -- make that, "competitors." It got a ton of coverage and worked its way into the policy lexicon but apparently to no avail. Today we released an update to that study, and the news isn't great: We have now climbed to a nearly 32% cost disadvantage with the rest of the world. This means that in three short years our cost gap with our international competitors has risen 43%. Not only is there a cost disadvantage with all of the competitors studied, but there's a cost disadvantage with each of the competitors used in the study. Every one.
The major culprits in terms of costs?
-- We have the second highest corporate tax rate in the world. Fully a third of the cost disadvantage is owing to our corporate tax rates. Six out of 9 of our competitors have lowered their tax rates since our last study. Said NAM President John Engler, "By standing still, we are falling behind."
-- Our tort costs are the highest in the world. Our tort costs exceeds the GDP of each of these countries.
-- Our pollution abatement costs are the highest in the world;
-- Natural gas prices rose. This is ironic since we sit on 420 trillion cubic feet of it, but 85% of that supply is subject to a federal moratorium. In other words, what was an asset for us in the 90's is now a liability in terms of costs. No other country would sit on a reserve like this and not tap it;
--- Health and pension benefits added a little over 1% to the increase in the cost gap.
The way is clear, and Congress can certainly fix most of this. Or they can run around making speeches about how pro-business they are. That's a whole lot easier.
Click here to see a copy of the new study. The Executive Summary is at pages 10-11 of the pdf.
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New Cost Study: US "Falling Further Behind" 16 Comments (0 topical, 16 editorial, 0 hidden) Post a comment »
Better watch out though. Just as the Congress is attacking the 1% solution for spending (Pork), I expect it'd attack the 1% solution for costs here (Medical care).
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If you're seeing shades of gray, it's because you're not looking close enough to see the black and white dots.
if the Democrats gain power. They will raise corporate taxes, increase environmental regulation, and institute ever more stringent rules for workplace conditions.
Because it's only fair.
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Evil men hide from the truth, but good men stand upon it.
But what is the excuse for these costs going up during five years of Republican control? Screaming at the Dems, though it feels good is a lot like getting mad at a spider that bit you. Its in their nature.
My real anger is at the betrayers, er Republicans who acted in the same way.
"Nothing works like freedom, Nothing succeeds like liberty"
Kyle
It isn't like we've had a lot of luck using that "Republican control" for much of anything, what with anything that doesn't completely suck being filibustered in the Senate. Energy production is a prime example of this. Even if we were able to get common-sense energy legislation through, it will take years before it will have much effect on prices. These problems we are experiencing now with energy costs were festering in the 90s.
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"I am a great believer in luck. The harder I work, the more I have of it." -- Thomas Jefferson
The main impact seems to have been from other countries reduing their tax rates, not us raising ours.
Some of our costs which have gone up, such as medical care, are extremely difficult for Congress to solve.
Without control of Congress (sixty conservatives in the Senate), any change in our preferred direction will be hard.
solve some of the medical care problems by not mandating medical payment plans and calling it "insurance." "Insurance" is for when you have an unexpected cost. Congress and the state legislatures have mandated medical coverage for everyday items, so we actually pay more (in aggregate) for medical coverage than we have in the past.
If they just stop mandating some of this crap and allow us to choose what coverage we want, maybe costs wouldn't be so high!
And yes, I know I'm using Neal Boortz's talking points from this morning's Nuze. I don't care, I've been talking about this for years.
"In matters of style, swim with the current; in matters of principle, stand like a rock."
--Thomas Jefferson
The first thing is that we have a very "liberalised" economy as the Brits would say compared to our European counterparts. In general we are much more dynamic and less hampered with overbearing labor laws and have lower value added taxes. I was surprised to see those figures. Our annual growth is still consistently higher than theirs.
Another thing comes to mind when I hear comparative coporate tax rates with other countries is this: what is average taxabe amount with respect to gross income? While I'm not condoning our corporate tax rates (or our tax code in general), I wonder how much other governments allow businesses to write off before arriving at the taxable income total. If they differ greatly and do not allow as many write-offs, the lower tax rate is irrelevant since it's consistently applied to a much higher number.
Don't tread on me.
There is a chart with adjustment to the tax rates called "Marginal Effective Tax Rate" that takes into account the differences in depreciation and other tax write offs. Using this rate instead of the statutory rate drops us from the 2nd highest to the 4th highest corporate tax rate.
I just skimmed thru it. I missed that one. But, it obviously has an effect...though not as much as I figured.
Of course, I'm still surprised at the general findings. I makes one put a lot of conventional wisdom into question.
Don't tread on me.
Another thing comes to mind when I hear comparative coporate tax rates with other countries is this: what is average taxabe amount with respect to gross income?
when you consider that businesses don't actually pay taxes, any business tax is too much "business" tax.
John
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True, you can sit outside in Paris and drink little cups of coffee, but why this is more stylish than sitting inside and drinking large glasses of whisky, I don't know.
P.J O'Rourke
Another thing comes to mind when I hear comparative coporate tax rates with other countries is this: what is average taxabe amount with respect to gross income? While I'm not condoning our corporate tax rates (or our tax code in general), I wonder how much other governments allow businesses to write off before arriving at the taxable income total. If they differ greatly and do not allow as many write-offs, the lower tax rate is irrelevant since it's consistently applied to a much higher number.
Your words, not mine. Remember, I'm not a Libertarian so you have to spell things out for me in fingerpaint.
John
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True, you can sit outside in Paris and drink little cups of coffee, but why this is more stylish than sitting inside and drinking large glasses of whisky, I don't know.
P.J O'Rourke
When reports present such information I think it's prudent to question the definitions used in arriving at its conclusions to make sure that we're comparing apples to apples and so on.
I say "irrelevant" because, for this particular post, my mind was more on how the tax systems work comparatively than on the existence of taxes in the general sense.
Don't tread on me.
The FairTax helps to make America more competitive.
22% of the cost of goods is EMBEDDED taxation.
A Flat Tax doesn't remove this fact.
Only the FairTax removes income taxes from the costs of goods and makes America more competitive.
Steve Forbes and Dick Armey need to WAKE UP and support the FairTax.
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Eliminate the IRS and all payroll taxes! http://www.fairtax.org
If you had to bet, what do you think their choice will be? I know where I would put my money.
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Kevin Holtsberry