Thursday, May 24, 2012

Yes America, We Can Have Jobs, But Only If....

Ariana Lindquist / Bloomberg via Getty Images

The above photo: A worker inspects the body of a vehicle on the production line at the Bayerische Motoren Werke AG (BMW) manufacturing plant in Spartanburg, South Carolina, U.S., on Wednesday, Jan. 11, 2012. Bayerische Motoren Werke AG (BMW), the world's largest maker of luxury autos, will invest about $900 million in its South Carolina factory to expand capacity and prepare the facility to produce a new sport-utility vehicle.

American manufacturing has taken some nasty hits over the decades as US jobs were off-shored, downsized and/or otherwise relocated to other corners of the planet.  However, the situations appearing to be somewhat turning around. Considering the vast number of unemployed folks in America, it's hardly an American job renaissance but there are regional bright spots.

In this still tepid recovery, the biggest feel-good story has been the resurgence of American manufacturing. As industrial production has fallen in Europe and growth has slowed in China, U.S. factories have continued an expansion that has stretched on for over 33 months. In April, manufacturing growth was the strongest in 10 months.
There are a number of reasons for this revival. Rising wages in China – up from roughly one-third U.S. levels to half that in a decade — and problems associated with protection of trademarks and other issues have led many U.S. executives to look back home. Some 22% of U.S. product manufacturers surveyed by MFGWatch reported moving some production back to America in the fourth quarter of 2011, and one in three said they were studying the proposition.
The above story about Seattle job growth begs the question:  Why?  The answer is:  Taxes.  Low tax business friendly states are economically performing better than high tax anti-business states.  The Tax Foundation follows this issue and has a state by state index of the business tax climate.

2012 State Business Tax Climate Index
The 10 best states in this year’s Index are:
1. Wyoming,  2. South Dakota 3. Nevada 4. Alaska 5. Florida 6. New Hampshire 7. Washington 8. Montana 9. Texas 10. Utah
The 10 lowest ranked, or worst, states in this year’s Index are:
41. Iowa 42. Maryland 43. Wisconsin 44. North Carolina 45. Minnesota 46. Rhode Island 47. Vermont 48. California 49. New York 50. New Jersey
Generally, blue states and purple leaning states have the worst business climates, highest taxes and most draconian anti-business regulations.  Capital functions like the laws of physics:  it will always seek and find business friendly abodes.  Taxes are very much part of the 'cost of doing business' and to remain a competitive producer, businesses will always gravitate to low tax states.

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