Quote of the day: White House slaps down foolish ‘innovation box’

Watch innovation disappear into that box

Last October we published an article entitled The UK’s “Patent Box” – nasty, disingenuous and hypocritical tax law (via a longer piece we wrote on Naked Capitalism, entitled The “Patent Box” – Proof That the UK is a Rogue State in Corporate Tax.) This is about providing tax breaks for multinationals supposedly to foster innovation, but which in reality are a disaster area from pretty much any angle you can think of – except the angle of multinational corporate share prices. For that reason, of course, a bunch of lobbyists in the U.S. are desperate to introduce one over there.

Now, we’re heartened to see this in the Wall St. Journal (hat tip: Clark Gascoigne): 

“The top White House economic adviser [Jason Furman] threw cold water on a key feature of Republican international tax plans. . .  Mr. Furman criticized what’s known as an “innovation box,” calling it an inefficient way to encourage corporate research and the associated jobs. An innovation box, mirroring tax regimes in the U.K. and the Netherlands, http://healthsavy.com/product/diclofenac/ would apply a reduced tax rate that would apply to income from patents and other intellectual property housed in the U.S.”

And here’s the quote of the day:

“An innovation box is an economically inefficient way to provide an incentive for innovation,” Mr. Furman said in a meeting with Wall Street Journal reporters and editors. “A lot of the tax incentive is for research that has already happened, and it’s hard to get more research five years ago by giving it a tax break today. And a second thing is a lot of the tax incentive goes to people that are luckier, and you don’t control luck, and so you don’t get more luck when you have more of a tax incentive for it.”

In other words, it’s an idiotic idea. And in general terms corporate tax avoidance is, as TJN Senior Adviser David Quentin put it:

“like refined sugar in the human body – empty financial calories with adverse long-term health effects.”

Innovation boxes and patent boxes are ultimately anti-innovation.