Lawmakers should focus on simplifying the federal tax code, creating stability, and broadly improving economic incentives. There are incremental steps that can be made on the path to fundamental tax reform.
As predicted, the Inflation Reduction Act’s misguided price-setting policy is already discouraging drug development. Rather than double down on it, as President Biden proposes doing in his budget, lawmakers ought to restore incentives to invest in the United States.
Tax reform should be about increasing fairness. And the way to get there is by reducing complexity and double taxation, not by doubling down on them.
President Biden proposed a 7-point hike in the corporate tax rate to 28 percent, a new minimum book tax on corporate profits, and higher taxes on international activity. We estimated these proposals would reduce the size of the economy (GDP) by 1.6 percent over the long run and eliminate 542,000 jobs.
While the bulk of the proposed tax increases and spending programs remain under debate, Democratic lawmakers have reportedly agreed on prescription drug pricing provisions as a starting point for a revived Build Back Better package.
Government-set pricing of prescription drugs is not a fix for today’s rampant inflation and further, it would give rise to new problems of its own.
Rather than pursuing policies that have demonstrably reduced R&D and innovation elsewhere, and that would disincentivize R&D in the U.S., lawmakers should continue to ensure an ecosystem that encourages risk-taking and R&D.
Lawmakers are considering policy changes within the reconciliation bill that would reduce private R&D within the pharmaceutical industry and reduce the number of new drugs coming to market. Instead of hampering medical progress, policymakers should work to ensure that the tax code remains conducive to R&D spending and the resulting innovation.
Congressional lawmakers are putting together a reconciliation bill to enact much of President Biden’s Build Back Better agenda. Many lawmakers including Senate Finance Committee Chair Ron Wyden (D-OR), however, want to make their own mark on the legislation.
While the excise tax penalty in H.R. 3 is referred to as a 95 percent tax rate, it actually amounts to a 1,900 percent tax rate because of how the proposal defines the tax base. In other words, under the H.R. 3 tax penalty, a drug that sells for $100 would incur a $1,900 tax.