The US Wakes Up to Foreign Direct Investment Attraction

The US Wakes Up to Foreign Direct Investment Attraction

March 21, 2013
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The world economic downturn that began in 2008 has affected everyone and, when it comes to government, not every government can react by printing more money to address the income shortfalls that they face.

This is particularly true of US states who have found that not only have their tax revenues decreased as a result of the downturn, but also their federal subsidies for state welfare programs and the like.   They are beginning to understand that the best way to address the problem is to increase the number of people in the workforce, and job creation has become the new buzz word in economic circles.

One of the best ways to generate new jobs, of course, is to attract more foreign companies to locate in the states.

For example, in 2011, Ohio reported 87 FDI projects composed of investments totalling over $2.5 billion and creating around 6,500 jobs in the state.  Georgia reported 117 FDI projects worth $1.4 billion in 2011, estimated to create more than 7,500 jobs locally.  Oklahoma announced 12 FDI projects reaching a total of over $30 million in investment, generating 1,200 new jobs.

To meet the intense competition from other markets around the world, US states must upgrade the benefits offered to companies willing to relocate to those states.

Recently, a raft of new initiatives has been approved to encourage foreign companies to locate in particular states in the US, all of which are client states of ours.  Some examples follow:

  • New Mexico has just approved lowering its corporate income tax rate from 7.6% to 5.9%, while also enacting a Single Sales Factor for all manufacturers that does not include an investment threshold.
  • Indiana is cutting corporate income tax rates by nearly 25%, from 8% to 6.5% by 2015.
  • Delaware has no income tax on companies not operating in the state with low income tax rates on Delaware profits of 8.7%.
  • Illinois has passed its EDGE (Economic Development for a Growing Economy) program which provides a significant tax credit for 10 years to assist in reducing local operating expenses.
  • Oklahoma offers incoming businesses a choice betweena cash incentive or a tax credit package, and in some cases, qualifying businesses can take advantage of both.
  • Pennsylvania has a Keystone Opportunity Zone (KOZ) program which enables a company to develop land with greatly reduced state and local taxes.

The message is clear.  The US states see foreign direct investment as a major key to economic growth through new job creation throughout the country.  Given the desire of most Israeli manufacturers to impact the US market and ultimately to have some type of operation there, this is an ideal time to look at these options and consider taking advantage of benefits which may not be around forever.

Our organization can assist local companies to find the best US location for their operations and guide them to the state that works best for them.