I had the chance Saturday to participate in a roundtable with Stephen Moore, whose work at the Heritage Foundation and commentary for The Wall Street Journal has made him one of the most respected and sought after economic policy pundits on the scene. The event was organized by the Arizona chapter of the National Federation of Business.
Here are five takeaways from Moore’s talk.
1) Tax policies affect the wealth of states. In Moore’s latest book, An Inquiry into the Nature and Cause of the Wealth of States: How Taxes, Energy and Worker Freedom Change Everything, he teams with co-authors Art Laffer, Rex Sinquefield and Travis Brown to look at why some states are doing well, while others are struggling. The answer often comes down to tax policy.
He points to the American South’s economic surge at the expense of northeastern states as evidence. While states like North Carolina have consciously begun to lessen their tax burden and improve their labor conditions, states north of the Mason-Dixon Line are saddled with high taxes and labor markets that discourage employers from investing. For a stark comparative lesson, consider that Texas since 1990 has experienced a 65 percent job growth. New York’s was nine percent.
The future? If Moore had his way, it would mean southern states all pursuing the elimination of the income tax, creating a no-income tax zone that would be an economic powerhouse.
2) The competition cocktail: lower taxes, education choice and right to work. States don’t improve their competitive standing just by luck. They intentionally implement policy reforms that encourage economic growth, like lowering taxes, expanding choice in education and ensuring their state is right-to-work.According to Moore, if your state isn’t right-to-work, you’re not even in the ballgame when it comes to job attraction.
3) Debate over corporate inversions presents a teachable moment for the U.S. We shouldn’t be surprised that companies facing the highest corporate income tax rate in the industrialized world would look around for a friendlier environment to do business. Our corporate tax rate has resulted in what Moore calls a “head start program” for other countries. If you’ve ever questioned whether taxes influence behavior, you’ve got your answer.
Moore compared the Obama administration’s attempts to prevent companies from moving overseas to a kind of “Berlin Wall around the U.S.” Instead, the administration and Congress could take a baby step by aligning the U.S. corporate income tax rate with the international average. The upshot? We’d actually capture more revenue.
4) Don’t blame companies. With all the rhetoric over “economic patriotism,” American companies have been caricatured by some in Washington as soulless, callous entities that don’t care about the fate of the country.
It’s not true.
Moore reminded our group that U.S. companies are the best run companies in the world. They’re highly efficient, lean, mean machines that tightened their belts during the great recession and, because of it, are now sitting on lots of cash.
So why isn’t that cash turning into greater job growth? Because companies are worried, and rightly so, according to Moore.
In the last six years, employers have seen a mammoth and expensive overhaul of the heath care sector, consistent overreach from the EPA, tax reform perpetually stuck in neutral and a labor policy heavily slanted to labor unions.
American companies are waiting for the other shoe to drop from Washington. Who can blame them?
5) Low labor force participation is a drag on the economy, but we can do something about it. From his perch at a think tank and newspaper, Moore gets to visit with executives and industry stakeholders from broad cross section of the American economy.
He shared his recent reflections on a conversation with trucking industry representatives. Their biggest problem wasn’t tax policy, or health care or labor strife; it was an inability to fill jobs.
The truckers’ plight isn’t unique. Across the nation, we could fill 1-2 million jobs right away if we had willing, available workers who, with some base level education could pass a drug test and criminal background check, according to Moore.
These aren’t minimum wage jobs. In the case of the truckers, we’re talking jobs that pay north of $65k a year.
The cause of the low level of workforce participation, has much to do with an education system that isn’t preparing students for available jobs, and a public benefits system, which includes unemployment insurance and welfare, that discourages work.
Moore harkened back to the Welfare to Work bill of the 1990s that, with the bipartisan support of a Democrat president and a Republican Congress, transformed the welfare system and got millions of Americans back into the workforce. Those gains, according to Moore have been eviscerated by the current administration.
There’s proof reforms can work today, said Moore. North Carolina actually recently reduced its unemployment benefits and has seen job growth.