Congress should give corporations a tax break on profits generated through creative activity in the U.S. in order to increase economic competitiveness, according to a report released Monday by the Information Technology and Innovation Foundation.
The group urged Congress to add an “innovation box” to the tax code that corporations could check on their tax forms to receive the lower rate for activities such as research.
{mosads}“People and capital are moving around the world more easily than ever, so the United States must be prepared to compete with every other nation when it comes to retaining and attracting innovation-based investment,” ITIF founder and president Robert D. Atkinson, the report’s author, said in a news release. “The U.S. economy cannot stand to lose this global competition, especially for innovation-based industries.”
The ITIF said that a number of companies have adopted some type of innovation box in the past decade, so the U.S. needs such a box as well. However, unlike other versions, a U.S. innovation box should be specifically tied to economic activity in this country, the group argued.
The report noted that there is some support for an innovation box from members of Congress on both sides of the aisle.
In July, Reps. Charles Boustany (R-La.) and Richard Neal (D-Mass.) released a draft innovation box bill. The proposal would allow corporations to deduct 71 percent of their eligible profits from their taxable income. Also, a bipartisan working group on international tax reform led by Sens. Charles Schumer (D-N.Y.) and Rob Portman (R-Ohio) released a report that spoke favorably about an innovation box.
But groups on the left and the right have also criticized innovation boxes, according to the report. The conservative-leaning Heritage Foundation has expressed concerns about the idea because it would skew the tax code by taxing some industries at lower rates than others and because it would make the tax code more complex. The liberal-leaning Center for American Progress argued that all companies should be paying higher taxes, so an innovation box is unfair because it would cut taxes for businesses.