American Innovation Matters (AIM)

Paper Discusses the Logic in Adopting an IP Box

May 16, 2016

WASHINGTON, DC – American Innovation Matters (AIM) is pleased to highlight a newly published paper by economist Ike Brannon appearing in Tax Notes that advocates for the adoption of a U.S. IP Box in order to protect American innovation.

AIM spokesperson Lisa Camooso Miller issued the following statement:

“Brannon’s findings confirm that American intellectual property is under threat, and inaction in the face of the OECD’s Base Erosion and Profit Shifting (BEPS) project and increased foreign acquisitions and corporate inversions will have serious consequences for American competitiveness.”

The paper makes the following conclusions:

Any structural change in the U.S. tax code should account for the world as it is and not the world we wish we lived in. And we inhabit an incredibly global society: U.S. trade as a proportion of GDP is the highest it’s ever been… 

In the past two decades, our primary trading partners have responded to the increasing globalization of the world economy by radically altering their corporate tax codes to retain and attract capital. The most obvious way they have done this is by reducing their corporate rates. For instance, the average corporate tax rate in the OECD has fallen by about 10 percentage points since 2000. All the OECD members have reduced their corporate income tax in the past two decades, except one — the United States…

In a world with extremely mobile capital, it makes sense for countries to design their tax codes in a way that attracts capital as cheaply as possible. An IP box delivers a relatively high return by targeting capital that’s both relatively mobile and relatively good at boosting productivity and increasing economic growth… 

In a world in which most of our trading partners have an IP box, it behooves the United States to have one as well. The conclusion of the OECD’s base erosion and project-shifting project has essentially blessed IP boxes, and it’s a safe bet that nearly all the OECD member countries will have some form of an IP box before too long….

An IP box would do more than just keep patents and IP from flowing overseas: It would help the United States retain and attract R&D activity as well, since that tends to move with IP. An IP box would also help keep manufacturing — and the jobs it creates — in the United States…

Even if we managed to accomplish a comprehensive tax reform, an IP box would still provide a way for the tax code to encourage the economic activity most likely to boost productivity and create jobs.


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