Thursday, September 22, 2011
Incentives for Innovation - Senate Finance Committee Hearing
I was honored to have the opportunity to testify before the Senate Finance Committee this week (9/20) at a hearing on Tax Reform: Incentives for Innovation. A few comments I included in my oral and written testimony:
1. Tax reform should consider our country's economic, societal and environmental goals and be sure that that tax law is not hindering them, and perhaps even support them. Innovation is something that for economic reasons also warrants some support through the tax law.
2. Considerations should be given to modifying rules that potentially hinder innovation. For example, some MACRS lives, such as for computers, are too long. Also, while there is a desire to build cars with a higher mpg, Section 280F depreciation limits on cars makes them less attractive to business buyers. Why not remove or greatly reduce such limits for cars getting a certain mpg?
3. Modernize the Section 179 expensing election by also having it apply to intangible assets.
4. Look for ways to provide wider incentives for start-up innovators such as by broadening the Section 1202 gain exclusion to investments in partnerships and S corporations too.
5. Improve the research tax credit by making it permanent. Also review the exclusion for internal-use software as that term has a different meaning today than it did in 1981 when there were no web-based businesses.
6. In reform discussions about lowering the corporate tax rate, we'll need to consider the global economic reality that not only do other OECD countries have a lower statutory rate, many also have tax incentives for R&D.
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