EDITOR’S VIEW

ust as this issue is reaching you, the general election is drawing to a close, and the American population is getting used to the idea of a new team at the wheel of the ship of state. In the weeks leading up to the election, I was struck by two contradictory characterizations of the nation’s competitiveness in 2008. On the one hand, the World Economic Forum (WEF) says in its Global Competitiveness Report that the U.S. is the most competitive of the 134 countries included in its annual index ranking of country competitiveness. On the other, KPMG’s annual survey of corporate and indirect tax rates for 2008 found that the U.S. corporate income tax rate was higher than all other global regions – 14.1 percent higher than the global average and nearly 17 percent higher than the average among European Union nations – which makes the U.S. increasingly uncompetitive.

by MARK AREND

mark.arend bounce@conway.com

(See the Germany article for some early economic-development implications of Germany’s corporate tax reduction from 38.7 percent to 29.8 percent, and note that Sweden intends to cut its corporate tax rate from 28 percent to 26.3 percent.)

      Which is it? Is the U.S. competitive, and therefore able to attract a competitive share of foreign direct investment, or not?

      Both analyses have merit and are worth a closer look. And both take into account the financial crisis roiling world economies. WEF’s analysis (www.weforum.org) is based on publicly available data and an executive opinion survey.

      “While it’s true that the U.S. has been hit by quite a significant financial crisis, along with a lot of other countries, the U.S. is endowed with a number of structural strengths that allow it to be very productive and therefore ride out such economic crises as this one,” noted Jennifer Blanke, director and senior economist at WEF and head of its Global Competitiveness Network, in October.

      Conversely, the KPMG analysis (www.kpmg.com) notes that of the 106 countries surveyed, only the UAE, at 55 percent, Kuwait (55 percent) and Japan (40.69 percent) impose a higher income tax rate than the combined rate of 40 percent in the U.S.

      “The U.S. rate was higher than all other global regions in 1999, and the difference is even more dramatic today,” said Scott Hodge, president of The Tax Foundation (www.taxfoundation.org), when Tax Foundation Fiscal Fact No. 145, in which KPMG’s survey findings are contained, was issued in September. “If the Swedes now recognize that taxes matter to a country’s business climate and incentives to work, then when will America’s political class?”

      I put this contradiction in the context of the election, because in all likelihood, the U.S. – where the vast majority of our readers are based – will now either become even more competitive or even more uncompetitive. As we know, one candidate was for lower taxes, smaller government and free trade. The other was not. Where your property portfolio grows or shrinks will have a lot to do with that.

      Till next time,

      Mark Arend