Research and Development (R&D)

The Misguided Notion of Government-Set Prices for Prescription Drugs

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.

Improving Tax Treatment of Structures Offers Commonsense Way to Boost Competitiveness

The U.S. tax system is biased against capital investments. Ending these tax penalties would boost economic output, productivity, and employment.

Tax Subsidies for R&D Expenditures in Europe, 2022

Many countries incentivize business investment in research and development (R&D), intending to foster innovation. A common approach is to provide direct government funding for R&D activity. However, a significant number of jurisdictions also offers R&D tax incentives.

Taxes, Tariffs, and Industrial Policy: How the U.S. Tax Code Fails Manufacturing

Policymakers actively marginalized the manufacturing sector by saddling them with cost recovery rules that prevent them from deducting the full cost of investment in physical plant and equipment. Going forward, policymakers should avoid haphazard fixes, targeted measures, and protectionism.

To Stimulate R&D Investment, Stop Penalizing it in the Tax Code

In his State of the Union Address, President Biden called for leveling the global research & development (R&D) playing field by increasing federal R&D spending, specifically by asking Congress to pass the bipartisan United States Innovation and Competition Act (USICA).

10 Tax Reforms for Growth and Opportunity

By reducing the tax code’s current barriers to investment and saving and simplifying its complex rules, lawmakers would greatly enhance the ability of Americans to pursue new ideas, create more opportunities, and build financial security for themselves and their families.

Taxes, Fiscal Policy, and Inflation

Consumer prices rose by 7 percent in 2021, the highest annual rate of inflation since 1982. Where did this inflation come from and what might its impacts be? Tax and fiscal policy offer important clues.

Going Beyond the Headlines: Understanding Corporate Taxes

Every so often, you will see headlines highlighting large companies that pay little or no corporate income tax. While these stories may seem shocking, the reality is much more mundane.

New Study Shows Tax Policy Has Strong Effects on Innovation

When examining how tax policy impacts the economy, researchers typically look at labor supply and investment responses. One other channel through which taxes impact the economy has been less studied: innovation.

Testimony: EU Parliament Subcommittee on Tax Matters Hearing on the Impact of National Tax Reforms on the EU Economy

Tax Foundation testimony on the diversity of tax systems within the EU, three important ways to consider reforms by Member States, and several recommendations for the EU Parliament’s Subcommittee on Tax Matters to consider.

Don’t Copy European Drug Pricing Policies that Reduced R&D and Innovation

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.

Patent Box Regimes in Europe, 2021

Patent box regimes (also referred to as intellectual property, or IP, regimes) provide lower effective tax rates on income derived from IP. Most commonly, eligible types of IP are patents and software copyrights. Currently, 14 of the 27 EU member states have a patent box regime.

H.R. 3 Would Reduce R&D Spending and Medical Innovation

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.

Tax Foundation Comments on the Wyden, Warner, Brown Discussion Draft

The proposed restructuring of the GILTI and FDII regimes makes several changes to the tax base that are largely offsetting, leaving virtually all the revenue potential to be determined by the tax rates on GILTI and FDII and the haircuts on foreign tax credits. Lawmakers should carefully weigh the trade-offs between higher tax revenues and competitiveness.

Lawmakers’ Tax Rate to Help Pay for Reconciliation is 1,900 Percent

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.

Expense Allocation: A Hidden Tax on Domestic Activities and Foreign Profits

While arcane, expense allocation rules are relevant to current debates because they result in a heavier tax burden for U.S. companies under current law than the recently negotiated global minimum tax proposal.

Paying for Reconciliation Bill with “Health Care Savings” Threatens Medical Innovation

One of the ways lawmakers intend to pay for $3.5 trillion of new spending in the budget reconciliation package is by creating “health care savings.” The leading proposal to achieve this is H.R. 3, the Elijah Cummings Lower Drug Costs Now Act, which would change the way that prescription drug prices are negotiated under Medicare Part D.

Tax Treatment of Nuclear Energy Should Be Simplified, Neutral, with Renewable Energy Sources

Tackling climate change and shifting the economy towards renewable energy has been a key part of the Biden administration’s agenda. However, this effort must first confront an overly complicated and non-neutral tax code, particularly in how it treats nuclear energy, for the White House to reach its ambitious goals.

Tax Expenditure

Policymakers Offer Proposals to Fix Three Upcoming Tax Changes

Three upcoming tax law changes scheduled by the 2017 Tax Cuts and Jobs Act (TCJA) to help offset its revenue losses would be canceled by proposed legislation that would prevent the tax treatment of investment from worsening over the coming years.