Let's fix what really is holding the economy back

North Carolina Sen. Thom Tillis might want to hire handlers with a better sense of timing.

While answering questions recently, he decided to illustrate government’s unwarranted list of business regulations by focusing on an FDA requirement that food-service workers wash their hands after visiting the bathroom. Government shouldn’t have to require this, he said, because any restaurant that didn’t require such a thing would go out of business.

---

The timing of his remarks, the Centers for Disease Control had just confirmed more than 100 cases of measles from an outbreak at California’s Disneyland and some Republicans were waffling on the question of vaccines, guaranteed headlines. But his faulty logic was equally newsworthy.

The free market works best when consumers are educated. How would customers know a restaurant didn’t require hand washing? Tillis answers by saying businesses would be required to post signs saying as much — required by the federal government, that is. Either way, Washington comes between your food and the bathroom, and I’m not sure I sense a lot of public outrage about that.

When it comes to the economy, Tillis and too many other lawmakers in Washington are missing the point. Federal regulations may burden businesses, but the corporate tax structure is crippling economic growth.

Two studies released in recent days illustrate this. One is of particular interest to Utahns. The Brookings Institution published a study of industries associated with innovation, science and technology — a wide-ranging part of the economy necessary for progress and expansion in the modern world. It ranked the U.S. metropolitan areas where such industries are most prevalent.

To the surprise of much of the national media, Ogden, Salt Lake City and Provo, considered as separate metropolitan areas, each landed among the top 20.  Bloomberg.com quoted Mark Muro, head of policy at Brookings’ metro program, as saying, “Silicon Valley gets all the hype, but those three metro areas are quietly building a very serious, diversified advanced industries sector—and have the growth to show for it.”

This is in line with recent news about the state’s low unemployment rate (about 3.6 percent). The Wall Street Journal said this reflects “broad-based gains” and results from good local government decisions, including an investment in mass-transit and other infrastructure.

The bad news? The United States is losing ground against other nations. Brookings found the nation’s share of global research, development and patenting dropping. It pointed to “gridlock in Washington” that is preventing “sensible corporate tax reform” and free trade legislation.

The second report comes from the Tax Foundation, an independent Washington-based research company. It concluded the nation’s high corporate tax rate — now second in the developed world to France — “reduces investment and economic growth, undermines productivity, and encourages companies to move business to other countries,” according to a summary.

Fortunately, this is one issue on which Republicans and President Obama seem to agree. Republicans want to reduce the marginal tax rate from 35 percent to 25 percent, while the president prefers 28 percent. That shouldn’t be too hard to settle. Both sides also would do away with many tax breaks, making the system more equal.

Unfortunately, it isn’t as simple as that. The largest share of non-government employees in many states, including Utah, work for sole proprietorships or other companies that pay taxes through the individual filings of owners or directors. The system encourages this. However, unless tax reform includes both corporate and individual rates, it won’t truly help all businesses.

And when it comes to individual rates, agreements between the two parties are far apart.

So while Tillis and others try to wash their hands of burdensome regulations, and while they send up bills they know will be vetoed, they should instead set their minds to the difficult task of hammering out effective tax reforms.

Because no matter what Utah lawmakers do to make the Wasatch Front prosper, the state can’t reach its potential until Washington stops infecting it with impediments.

Oops: My last column, which focused on the level of the Great Salt Lake, contained an error. It referenced a study by the Utah Rivers Council, which was done with help from a University of Utah economics professor, not one from Utah State University.