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  • Less Economic Freedom = Fewer Jobs for Americans

    What does America’s declining economic freedom mean for you? It means that America will create fewer jobs. And that means that Americans will be poorer, as well as less free.

    A statement last week by Graham Mackay, the head of SAB Miller, one of the world’s largest brewers (they make, among many other beers, Miller Lite), explains how and why this will happen.

    In 1999, SAB Miller moved its headquarters to London, attracted, Mackay said, by “the liberal and predictable tax regime.” But since the mid-2000s, the UK has been losing economic freedom. In fact, in 2010, the UK fell out of the top ten for the first time, just as the U.S. dropped into the ranks of the ‘mostly free’ in the Index of Economic Freedom. The UK’s ranking has now declined for four consecutive years, and the level of economic freedom in Britain is now as low as it has been since the Index began to measure it in 1995.

    As a result, Mackay pointed out, the conditions that drew SAB Miller to Britain no longer exist:

    Today the tax system is not predictable and there have been numerous increases, particularly when it comes to personal taxation. This means that as a global company we are no longer able to attract our best global talent to the UK. Why would someone move from Hong Kong where the marginal tax rate is 15 per cent and come to the UK where it is closer to 52 per cent. Taxation was a key part of our decision to locate a new global procurement business not in the UK but in Zug in Switzerland.

    That single decision lost Britain 400 jobs. And SAB Miller is not the only company to flee the increasingly unfree economy of Britain. The damage goes far beyond the banking and financial sector: firms such as Vodafone, the cellular provider, have also departed.

    And where have they gone? SAB Miller is worried about drawing talent to Britain (ranked eleventh in the Index) from Hong Kong (ranked first) and instead set up its new business in Switzerland (ranked sixth). Vodafone went in part to Ireland (ranked fifth). This is a competitive world, and businesses have choices. If the U.S. continues to fall behind in economic freedom, some businesses – as the example in Britain of SAB Miller shows – will make a rational decision to move elsewhere, and others will have less money to pay workers because they will be giving more to the taxman.

    In his State of the Union address, the President stated that “And to encourage these and other businesses to stay within our borders, it’s time to finally slash the tax breaks for companies that ship our jobs overseas and give those tax breaks to companies that create jobs in the United States of America.”

    But they’re not “our jobs” by eternal right. They are jobs created by private enterprise, within the context of the burdens imposed by the federal government. And as those burdens get heavier, the number of jobs on offer in this country shrinks. If the President is serious about job creation, he will address the real threat to it: the policies of his administration, and of past ones, that reduced the willingness of companies to invest and their ability to grow by restricting our economic freedom.

    Posted in Economics [slideshow_deploy]

    8 Responses to Less Economic Freedom = Fewer Jobs for Americans

    1. Darrell says:

      On July 1 2009, NJ passed a bill to tax NJ state lottery winners up to 10.8% retroactively back to January 1 2009. Is this Constitutional?

    2. Pingback: Pick an Economic Strategy, Mr. President

    3. SB Owner Springfield says:

      You don't need to go outside the country to witness people fleeing from political regimes that believe in high taxation, and therefore wealth redistribution.

      New York, California, New Jersey, and Maryland have all been leaders in out-migration following tax increases, and now suffer the consequnece of less revenue in spite of higher tax rates.

      Illinois has just joined the top five in out-migration with an estimated 730,000 to 780,000 people and businesses leaving the state the past 8 years. Illinois hasn't raised their income taxes, only TALKED about doing so EVERY year. Both Democratic candidates for governor propose a tax hike.

      If either gets elected in the general election, and follows Obama's lead, will the last person out please turn off the lights?

    4. Larry, Warren Oh says:

      Very well written and a timely piece. I don't understand how or why a majority of Americans aren't thinking this way. It just seems to make perfect sense that any business would chose to operate in the most business-freindly enviroment. People should relate these things that maybe they don't understand fully to things in their own lives. Try to relate government spending to your own, and try to relate business decision-making to your own household situation, for instance, if you had two or three job offers wouldn't you chose the work location that best suited your needs and was the most advantages to your family?

    5. Pingback: Must Know Headlines 2.1.2010 — ExposeTheMedia.com

    6. Drew Page, IL says:

      My sympathy goes out to SB Owner in Springfield, IL. As a fellow IL resident I can attest that he/she is absolutely correct. Illinois politics have been corrupt since befor Al Capone got here. They didn't get any better since Al's time.

      While principally responsible for this corruption, it isn't all the fault of Chicago Machine. We have had more than our share of corrupt Republicans who, not all that long ago, decided it would be more profitable for them to join with the Democrat power brokers to form what has come to be known as the "Combine". Those who make up the "Combine" make a big show of being either staunch Democrats or staunch Republicans, when in reality they are staunch crooks.

      They meet in Springfield and cut up the pie. For the "Combine" to work, everybody involved has got to get a taste. You want a contract to do work for the State, the County or the City? How much have you kicked in to the campaign funds? How much will you kick in to future campaign funds? You want to run for office in the State and you need financial help from the Party? Are you going to follow the party line as determined by the Speaker of the House, or the President of the Senate?

      Paying the State's bills, meeting the legal requirements to fund State employee pension plans, Teacher Retirement plans, Medicaid responsibilities? Let the next guy worry about that; there are more important issues to be decided like how I get my wife and kids and friends on the State payroll and how do I get a Committee appointment to earn extra pay and pension benefits. Illinois is rotten to the core. Businesses are finding it harder and harder to exist, due to ever increasing taxes and fees. Doctors have fled the State because they can't get medical malpractice insurance due to riduculous claims and settlements.

      And every damned politician in Illinois has run on a platform of "reform".

      I for one plan to vote against every incimbent politician in Illinois this year and invite my fellow Illinoians to do the same.

    7. Terry R Cushman, Dak says:

      I would like to get a report on a ratio of dollars taxed out of the economy and associated costs to business:-> to amount given to any govenment program. Then another ratio of how much in dollars it takes to tax a business out of a job. These should be reasonable numbers to track. Then you can get an actual cost of each job created by the gov, to jobs lost to taxes imposed to pay for it. If it costs the government 120,000 to create a 60,000 job that the employee gets 40,000 of, there is a ratio to the employer who has a profit margin of 2-3% and has a profit of 12,000 to 18,000 on an employee who collects 40,000 on a 60,000 pay and contributes 20,000 to taxes. The employer then is taxed on the gross it brought in, including the full amount it cost to opperate the business, including the employees compensation, what is the amount it takes to get the employer to drop an employee on a national average? tax out 18,000 and this employee is gone, tax out 12,000 and he might be gone, what is the national average of cash taxed out of the economy to each lost job, compaired to the cost of the government hand out to the individual to sustain them to the amount recieved by them?

    8. Al, New Orleans LA says:

      Maybe I am off topic here, but I wonder if a policy expert from The Heritage Foundation can counter in great depth the arguments presented by economist James Kwak at the baseline scenario which in a nutshell states that Reaganomics is a bunch of lies, low taxes doesn't equal higher GDP and there is no correlation between higher marginal tax rates, employment and GDP. He further goes on to blame our current deficits on the Bush era policies of tax cuts, the wars and the medicare drug program. Mr Kwak source of "irrefutable" evidence comes from an article published last December by Kathy Ruffing and James R. Horney at Center for Budget and Policy Priorities. The article is titled: "President Obama Largely Inherited Today’s Huge Deficits Economic Downturn, Financial Rescues, and Bush-Era Policies Drive the Numbers". My argument is that even in the times of Hamurabi in Mesopotomia 3,000 years ago, when people were allowed to keep more of their labor by getting a tax brake, society prospered. The same thing can be said of 16/17th century England: the more the British king would tax the less prosperity for the nation. Since I am not an economist, I want to learn real economic arguments to counter Mr. Kwak, and the Ruffing-Horney couple when debating with liberals.

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