The Cleanest Shirt In The Laundry
US must do more to stimulate job creation
By Joel Walters, PwC US Inbound Tax Leader
As we approach the presidential election this fall, the candidates are talking about strategies to drive job creation. Meanwhile, so-called “foreign” companies are investing into the US and employing millions of Americans. If we want our economy to be strong, we must indeed find ways to stimulate economic activity that results in job creation. Encouraging more of these investors from outside the US to come, to stay and to expand in our country is an important piece of that strategy.
As a native Minnesotan, I have also lived and worked in Florida, Virginia and New York, where I’ve seen the impact of foreign investment in those communities. I have watched companies engaged in industries such as education, aerospace, communications and manufacturing create jobs in those states. According to recent research PwC conducted for the Organization for International Investment (OFII), “foreign” companies in the US employ 6.1 million American workers, including 2.3 million in manufacturing. And when you take into account the additional jobs that are then created in suppliers and from the paycheck spending of their employees, you get to more than 24 million jobs, a pretty good result by any measure.
There are important reasons why foreign companies want to be here. In fact, PwC’s 2016 CFO Insourcing Survey with OFII found that CFOs at foreign-headquartered companies with US investments said the US is still a top location for their investment due to factors such as access to capital, infrastructure quality and skilled workforce. This is good news for sure.
Yet, the US is not attracting the investment it could. Why do I say that? If you look further into the CFO survey results, you can see that some of the shine has come off emerging economies as an investment location, and other advanced economies are still viewed with a level of skepticism in terms of growth potential. So it could easily be concluded that the US remains a highly-ranked investment location more because it is better than other available options (“the cleanest shirt in the laundry”) than because it is doing all that it could to compete.
I spent 20 years in senior finance roles with UK-headquartered businesses. Over that time I experienced firsthand the decision-making process companies make when deciding where to invest. Companies have choices — and the companies I worked for certainly took into account all factors that would impact the success and return on investment of those choices.
So it rings true to me when those same CFOs in the survey said two of the top four drivers of future investment are the tax system and regulatory environment — and they see the US as falling behind in these two areas. My view is that we are missing an opportunity to compete at the highest level we can to attract investment and in turn to grow jobs at home.
These are the same criteria US-headquartered companies use as they assess where to make their investments and consider the US as one of many potential locations. It is another circumstance where what I have said repeatedly rings true: the commonalities between foreign and US-headquartered firms are much greater than their differences — as are the solutions to helping both succeed in the United States to provide economic opportunities for American families.
We need foreign companies to be here, and we need the jobs they create for US workers. Let’s not allow the high taxes both US and foreign companies pay on their US income — with the US corporate tax rate being the highest in the world — be the reason they decide to go elsewhere.
Let’s make sure we admit the truth: Whatever diminishes foreign companies doing business in the US is bad for the US economy and costs us jobs. It’s not a matter of foreign-versus US-headquartered companies — the economy needs them all to provide opportunities for the American workforce.