Here’s Why America Is Becoming a Worse Place to Do Business
In the past year, it’s gotten easy to start and run a business in a record 137 countries.
The United States, however, wasn’t one of them. On Wednesday, the World Bank released its annual Ease of Doing Business report. This year America fell in the rankings—one slot—again.
The report found dozens of instances in which wealthy nations (defined as OECD member countries) reduced regulations and changed policies to make it easier to for entrepreneurs. For example, New Zealand—which ranked as the No.1 country in the world for overall ease of doing business—reduced the time required for getting an electricity connection when the utility there improved its payment monitoring and confirmation process.
But the report did not list one such reform made in the United States in the past year. One reason for the lack of progress is likely that the U.S. already ranks in the top ten in overall ease of doing business. America it has already picked off the the low-hanging regulatory burdens. At the same time, though, every other member of the top ten made some kind of progress over the past year, causing the U.S. to fall from seventh to eighth place in the overall rankings. Just six years ago, the U.S. ranked No. 4.
Part of the blame for this can be placed at the feet of New York State and New York City lawmakers, as these rankings are derived from studying the business conditions in each country’s most economically important city. But Congress is also at fault, as the gridlock that has gripped Washington makes it impossible to enact reforms that have even bipartisan support.
Fortune’s most recent cover story highlights the need to do something about the growing red tape that is making it harder for U.S. businesses to succeed.
Take, for instance, tax reform. There is broad support for simplifying the U.S. tax code for businesses, by reducing rates while broadening the tax base through the elimination of loopholes. This would make paying taxes easier because there are fewer ways for businesses to reduce their tax rate relative to other businesses. It would also level the playing field between businesses, making the economy more efficient overall.
Though the U.S. ranks in the middle of the pack among OECD countries in terms of ease of paying taxes, Congress has not been able to overcome ideological differences in favor of making small but meaningful changes to the tax code that would help make doing business in the U.S. easier. America’s economic rivals, however, have not been resting on their laurels. The United Kingdom, for example, reduced its corporate tax rate in 2016 and and increased the wage amount per employee that is exempted from social security contributions paid by employers.
Another example is Spain, which made paying taxes less costly for companies by reducing rates for corporate income, capital gains, and environment taxes—and made it easier by introducing and online system for filing value added tax returns.
There are dozens of other such examples in the report, which will hopefully serve as a wakeup call to Congress and local lawmakers that America’s economic competitors aren’t getting mired in political food fights as much as they are pushing forward concrete reforms to help their economies.