Last week, Congressman Vern Buchanan (R-Fla.) introduced three bills designed to spur innovation: the American Innovation Act of 2022 (H.R. 7503), the Start-Ups for Cures Act (H.R. 7504), and the More Cures Act (H.R. 7505). Lawmakers should support these important pieces of legislation, especially given the economic uncertainty and rampant inflation.
The American Innovation Act would raise the amount of start-up costs small business owners can deduct from their federal income taxes from $5,000 to $20,000. The bill would also raise the threshold for deductions from $50,000 to $120,000 for start-up expenditures like employees’ salaries and benefits, rent and utilities, and advertising.
Both the Start-Ups for Cures Act and the More Cures Act focus on developing cures for infectious diseases, such as antibiotics, antivirals, and vaccines. This is a complex, costly, time consuming, and risky process, especially given that many companies engaged in this R&D are startup enterprises that can struggle to attract the investment needed.
The Start-ups for Cures Act allows medical research startup businesses (with less than $1 million of gross receipts) to monetize unused credits. Startup businesses seeking to develop a cure usually have no revenue so see no benefit from R&D credits. This legislation fixes this and provides additional liquidity to continue research and development.
The More Cures Act provides a “bonus R&D credit” of 14 percent of any qualified research costs associated with the development of certain cures like infectious disease therapies. This applies on top of the normal R&D credit that is already available to taxpayers.
As it stands, the U.S. already provides relatively modest tax benefits to IP in comparison to the generous tax subsidies provided by many foreign countries. In fact, according to a 2020 study by the Information Technology & Innovation Foundation, the U.S. ranks 24th out of 34 comparable countries in the Organization for Economic Cooperation and Development (OECD) of the four-member BRICs (Brazil, Russia, India, and China).
According to a 2016 study by the United States Patent and Trademark Office, IP-intensive industries directly and indirectly supported over 45 million jobs, or about thirty percent of all American workers. These jobs are high-paying – a worker in IP intensive industry earned an average of 46 percent higher wages than the average wage of workers in a non-IP intensive industry.
The U.S. is significantly behind in the promotion of IP — Rep. Buchanan’s bills would help improve these shortcomings.
These bills are also an important alternative to Democrats’ assault on innovation.
Congressional Democrats have been urging President Biden to seize intellectual property rights through a misuse of his executive powers by having the administration utilize “march-in” provisions set by the Bayh-Dole Act. This law was never intended to be a method of drug price controls. By creating the threat of seizing IP on the arbitrary grounds that a drug is “too expensive,” Democrats would discourage any new medical innovation.
Additionally, Democrats’ Build Back Better bill included a proposal that would allow government bureaucrats to impose price controls on up to 20 medicines in Medicare Part B and Part D. If the manufacturer does not accept this government-mandated price, the drug manufacturers are hit with a 95 percent excise tax on the total revenues of the drug.
Rep. Buchanan’s three bills would spur growth and innovation at a time when small business and start-ups most need it. All members of Congress should cosponsor and support the American Innovation Act, the Start-Ups for Cures Act, and the More Cures Act.