NCPA - National Center for Policy Analysis

An Obstacle to Bringing Jobs Back to America: Taxes and Regulations

February 12, 2015

Some American companies have started bringing jobs back to U.S. shores, says Steven Malanga, a senior fellow with the Manhattan Institute, but much more needs to be done at the state level to encourage companies to investment domestically.

Some multinational companies, says Malanga, have returned to producing goods in the United States because the overseas production advantages, such as lower wages, have diminished (Malanga notes that pay for Chinese industrial workers has increased threefold since 2001). Additionally, with falling energy costs in the United States thanks to fracking and the shale boom, energy-intensive firms have an incentive to locate domestically rather than abroad. Additionally, nations such as China have lax intellectual property protections, unlike the United States.

But it's not all good news -- while Malanga cites estimates that "reshoring" could bring 1 million American manufacturing jobs to the United States by the end of the decade, there are too many states with laws on the books that make business tough. For example:

  • Industrial firms often face high taxes in exchange for lower taxes on residents. Malanga notes that 39 states impose higher property taxes on commercial businesses than on residents, which especially hurts manufacturing facilities, which need large amounts of space.
  • Unemployment insurance taxes make employing American workers expensive compared to their foreign counterparts.
  • Regulations in the United States are wildly expensive -- in California, regulations cost companies an average of $135,000 annually.

Malanga encourages states to look at their manufacturing policies and find ways to encourage domestic manufacturing investment.

Source: Steven Malanga, "No Shore Thing," City Journal, Winter 2015. 


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