A new research paper shows that reducing the tax on patent income can not only increase R&D spending, but also enhances patent quality. This is good news for countries like the United Kingdom, which just decreased its corporate tax on patent income.
Innovation Economics: How a New Theory Casts Light on an Old Problem of the Budget Deficit
The recent government shutdown and debt ceiling brinksmanship just postpones the time when the nation’s budget issues will have to be addressed. Unfortunately the “Washington consensus” on the budget, based on neoclassical economic thinking, leads to the wrong solutions. With its focus on cutting debt, rather than the debt-to-GDP ratio, and its overriding mantra that “everything should be on the table,” this mantra, being promoted by groups such as Simpson-Bowles, Domenci-Rivlin, The Concord Coalition, and the Committee for a Responsible Federal Budget, is generating budget solutions that will lead to less, not more U.S. growth.
It is time for a budget debate that is based on a new approach to economics – innovation economics – that focuses on maximizing innovation and long-term growth. This report argues that any budget solution must set a goal of improving the debt-to-GDP ratio as opposed to simply cutting the debt. It also needs to actually increase public investment and cut corporate taxes to drive growth, even though in the short run these steps will increase the budget deficit. These policies will be much more effective at spurring growth and U.S. competitiveness, which is what the ultimate goal of any economic policy, including budget policy, should be. Moreover, by spurring growth, these policies will help cut the debt-to-GDP ratio, a more accurate measure of the government’s fiscal condition.
R&D Tax Incentives to Stimulate Competitiveness, Jobs and Growth
Ezell will moderate a discussion on the use of tax reforms to spur innovation. It will include an analysis of recent laws passed by the government of Belgium to create a tax code that provides stronger support for innovation, R&D and entrepreneurship.
Don’t Tax Internet Access
One of the basic principles of an innovation-based tax policy is that government should “tax bads, not goods.” This is the idea behind proposals such as using carbon taxes to pay for an expanded research and development tax credit. So why would the government want to tax Internet access when, according to the McKinsey Global Institute, the Internet accounts for 3.8 percent of U.S. GDP?
Amateur Political Philosophy
In a new article, prominent conservative economist Gregory Mankiw defends the rich because he believes they have brought us value commensurate with their wealth. But this conception of a “fair” market is premised on ignoring government’s role. We need to understand government as a critical partner in the creation of our market economy.