New Report: Regulations, tax rates hurt economic competitiveness

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A new 400-page report by the World Economic Forum reveals the current state of economic competitiveness for almost 140 countries around the world and offers analysis on the trends that will determine the economic landscape of the future.

The report measures countries across three “subindexes,” each measured by a collection of “pillars” that seek to understand how countries perform across a variety of variables. The pillars cover everything from the state of infrastructure and primary education, variables that measure a country’s basic requirements to attracting and training quality workers, to technological readiness and innovation, variables that describe how a country will drive efficiency and new developments in the future.


“As a new wave of technological convergence and digitalization materializes in the Fourth Industrial Revolution, innovation and business sophistication, understood as the process of creating new products and services and finding new ways to produce things, are becoming increasingly important,” the report says.

Though the United States ranks third in overall competitiveness for the third consecutive year and performs well on the innovation measures, the country ranks a dismal 92nd in the world for total tax rate, a ranking that has fallen significantly in recent years. Switzerland and Singapore are the two countries ahead of United States in the competitiveness rankings, with Netherlands and Germany close behind.

The World Economic Forum also conducted an Executive Opinion Survey, asking 14,723 business executives in 141 economies to rank the most problematic factors for doing business in their country. In the United States, unsurprisingly, the top four answers all related to an inefficient and overreaching government: “tax rates, tax regulations, inefficient government bureaucracy, and restrictive labor regulations.”

Even though its high competitiveness ranking is driven by high scores in innovation, the United States still suffers in other major categories, including institutions, macroeconomic environment, health, primary education, goods market efficiency, and technological adoption. The United States did not place in the top 10 in any of those categories, and this could present a significant problem in the future if policy changes are not made.

“Since 2007, the United States has been falling behind both in absolute and relative terms in infrastructure, macroeconomic environment, and goods market efficiency,” the report found.

In an increasingly global market, we have to implement policies that help us remain competitive. The costs of trying to seal the country off from the world would far outweigh the perceived benefits. When Democrats push for high taxes to make companies “pay their fair share,” companies move jobs overseas to countries that rank much higher on business-friendly tax rates.

“[T]he competitiveness of advanced and emerging economies alike will rest on a country’s future orientation and its ability to update skills, and on the regulations and social norms that promote entrepreneurship and welcome change, collaboration, and creativity,” the World Economic Forum said.

In this election cycle, we have barely heard anything about economic competitiveness and policies that promote human flourishing, but these issues are crucial for the next president if we are to remain an economic powerhouse.

Daniel Huizinga is a columnist for Opportunity Lives covering business and politics. Follow him on Twitter @HuizingaDaniel.