Here's Why The US Is So Good At Producing Self-Made Billionaires

Warrent buffett a fourth billionaire in the world and
 was once a number one billionaire in the world .

A new report by the London-based Centre for Policy Studies has found that the United States has produced the third most self-made billionaires currently in the world, putting it behind only Hong Kong and Israel, when considered as a percentage of the total population. 

To determine the number of these "super entrepreneurs," the Center analyzed billionaires that have appeared on Forbes' list of richest people between 1996 and 2012. 

With the help of Ernst & Young's Entrepreneurship Barometer, an annual survey that ranks the best countries to start a business, as well as other sources, we examine what has made the U.S. so successful at producing billionaire entrepreneurs and profitable new businesses.

Low Tax Rates

With the corporate tax rate sitting around 40% (35% federal rate plus an additional 5% at the state and local level),

it may come as a surprise that the United States' tax structure is cited by the report as one of its entrepreneurial strengths. That seeming discrepancy lies in the fact that the U.S.'s tax rate, when measured as a share of GDP, is incredibly low. According to the OECD, the U.S.'s corporate taxes accounted for 2.6% of GDP in 2012. As recently as 2011, corporate taxes accounted for 1.3%. For reference, in the 1950s, corporate taxes accounted for around 5%.

Canada (26%), Norway (28%), and New Zealand (28%) all have a nominally lower corporate tax rate than the United States. Yet all three have higher corporate taxes as a share of GDP: 2.9%, 10.4%, and 4.4%, respectively. That means those three countries actually raise more revenue from corporate taxes than the United States proportionally, and U.S. companies pay a smaller share of their profits in income tax than corporations in those countries. While tax policy is a constant left/right argument, many believe that high tax rates discourage entrepreneurship.

Many in the U.S. love to harp on the country's high statutory tax rate, but corporate taxes are actually lower than they've ever been. Add in the multitude of loopholes, tax shelters, and exemptions that corporations take advantage of, and you can understand why Warren Buffet has called the notion that corporate taxes are high "a myth."

A Loose Regulatory Environment

While many entrepreneurs complain that the U.S.'s regulatory environment is complex, the country is actually an easy place to start a business when compared to the rest of the world. The 2013 "Ease Of Doing Business Index" ranks the United States as fourth, behind only Singapore, Hong Kong, and New Zealand.

The index measures regulations that affect the formation and running of businesses, such as the time and minimum capital to start a business and the procedures for purchasing property, obtaining permits, and managing bankruptcy. Similarly, the OECD index of regulations ranks the U.S. as half as burdened by regulations as Western European countries.

Here's some hard numbers on how much easier running a business is in the U.S.: 

Ernst & Young G20 Entrepreneurship Barometer 2013

On nearly every statistical measure for taxes and regulations, the U.S. scores better than the average across all G20 countries.

Access To Liquid Money

As the financial center of the world, it's not surprising that the United States' biggest advantage may be its financial markets. According to Ernst & Young, markets in the U.S. are not only large, but "efficient and highly liquid." In addition, the U.S. benefits from a deep network of angel investors, venture capital firms, specialty banks, and crowdfunding solutions to provide capital to new, innovative businesses.

The United States also benefits from an established innovation system that supports research and development. Only Japan and South Korea currently spend more money on R&D as a percentage of GDP.

Take a look at how the U.S. compares to the G20 average:

Ernst & Young G20 Entrepreneurship Barometer 2013

The Entrepreneurial Culture

The entrepreneurial spirit is central to American culture. Billionaire founders of Microsoft, Apple, Google, and Facebook are just the latest wave in a long tradition that began with titans like Henry Ford, Thomas Edison, Andrew Carnegie, and John D. Rockefeller. 

Ernst & Young G20 Entrepreneurship Barometer 2013

Entrepreneurs in the U.S. are able to take advantage of elite research universities and a close association between higher education and the business world, in the form of science parks, business incubators, and venture funds. While the connection between Stanford University and Silicon Valley is the most immediate example, Cornell's new high-tech campus is similarly trying to become a hub for the NYC startup scene.

In general, Americans are also more receptive to the risks associated with starting a business. The culture in the United States, unlike many countries, is one of support. Look at how U.S. entrepreneurs view business failure:

Ernst & Young G20 Entrepreneurship Barometer 2013

President Obama is not the first president to publically support small businesses and entrepreneurship, but he has famously made them a centerpiece of his economic program. He has called small businesses "the engine of our economy," suggesting that they drive growth and create jobs.

According to Ernst & Young, 79% of U.S. entrepreneurs say that the country's culture encourages entrepreneurship. By comparison, the G20 average is around 57%. 

All in all, America remains a business powerhouse, with an infrastructure and culture that produces more self-made billionaires than most other nations. Here's an overview of how the U.S. ranks in five categories on Ernst & Young's Entrepreneurship Barometer:

Read more: http://www.businessinsider.com/how-the-us-produces-self-made-billionaires-2014-5#ixzz31BwDcUXy