Creating a Long Term Path to Competitiveness

Is China still the global Mecca for manufacturing? Was it ever? Regardless of whether it is or not, these questions revolve around one single issue, and that’s competitiveness. Being competitive is important and it all starts at the tax level.

Is China still the global Mecca for manufacturing? Was it ever? Regardless of whether it is or not, these questions revolve around one single issue, and that’s competitiveness. Being competitive is important and it all starts at the tax level.

Ever wonder why the national unemployment rate continues to drop, but we don’t ever hear about it. In August of 2012 the national unemployment rate dropped below 8 percent. Now we’re likely to be around 5 percent by Election Day, which will be the lowest in six years. So why don’t we hear President Obama taking credit? Well, the answer is simple – he has nothing to take credit for. America is growing, but are we growing fast enough?

The national economy grew at a rate of 4.2 percent last quarter. This is good. But taking a second look, since the economic recovery began in the second half of 2009, the economy has expanded at a rate of just 2.2 percent. That’s more than a full percentage point below the post-WWII average of about 3.4 percent. In other words, our economy isn’t growing as fast as it once did.

Meanwhile, it’s worth mentioning that Ohio’s post-recession economic growth (from 2009 to 2012) outpaced U.S. economic growth during that same period 7.3 percent to 6.7 percent.

One of the reasons America became a great industrial superpower was because of the inventive spirit of its citizens. Americans make things. And why do we make things? There’s no other country that combines ingenuity and the access to resources and education better than the U.S. These strengths make America unique.

At a local level, let’s look at Cleveland, once ranked by Forbes in 2010 as America’s most miserable city. Today Cleveland is still the hands down leader when it comes to manufacturing, yet its recovery hasn’t been as fast as Ohio’s other major cities. For example, Cuyahoga County’s unemployment rate has improved by 1.2 percent since January 2011, while Franklin County has grown by 3.2 percent and Hamilton County by 3.7 percent. Ohio’s overall unemployment rate has improved by 3.4 percent.

So how can Cleveland recover faster?

Local taxes are always one concern; however there is always a return on investment, as higher local taxes are often representative of a higher resale value. Another is the structure and viability of local government, and Cuyahoga County recently implemented a new form of county government after decades of one party rule and mass public corruption. Finally, what about industrial redevelopment?

One out of every 10 workers in Cuyahoga County works in manufacturing. Yet there is a scarcity of clean industrial space in Cuyahoga County, making it difficult for new manufacturing companies to come in and take advantage of vacant industrial properties in prime locations.

Since 1997 there have only been 16 industrial redevelopment projects to clean up and redevelop environmentally hazardous industrial spaces in Cuyahoga County. Each of those 16 projects have either brought, or kept, jobs in Cleveland. Imagine if the Brownfield redevelopment projects in Cleveland were accelerated to 12 projects in one year. What if we reformed Ohio’s tax structure?

Bringing companies in to redevelop old decrepit industrial spaces would mean thousands of new jobs and represent a significant increase to the local tax base, not to mention spur a renaissance of new businesses and clean neighborhoods to support the new industry.

Luring companies into Ohio means Ohio must have competitive offerings. Isn’t access to a global center of commerce and a world-class transportation system more attractive next to a competitive tax structure with low income tax rates? Cuyahoga County already has the highest taxes in Ohio, and lowering the income tax rate would make a lucrative incentive to companies looking to expand.

States with a lean tax structure are competitive, while states with high taxes are not competitive. The same goes for countries. Creating a path to long term competitiveness requires a vision for lean tax rates.

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