Today Wisconsin Representative Paul Ryan, chairman of the House Budget Committee, will debut the Republican proposal for the 2013 federal budget. The budget is expected to propose reforms to the corporate tax code by lowering the corporate tax rate to 25 percent and shifting to a territorial tax system in which companies would no longer be taxed on their overseas earnings. Individual income tax would be overhauled as well by ending the alternative minimum tax, and moving to two tax brackets of 10 and 25 percent. Paul Ryan’s op-ed about the Republican budget in yesterday’s Wall Street Journal provides a preview.
CFR’s Ted Alden discusses the need to reform corporate taxation to keep the United States competitive. In addition to lowering statutory rates closer to levels of the other OECD countries, the United States should move to a territorial tax system—as most of the world has already done—to remove the disincentive to repatriate profits.
Corporate regulation and taxation. Read more from top economists and business experts on solutions for addressing corporate tax reform.
A Cautionary Tale of Stolen Innovation
Businessweek reports on the boom in Chinese corporate espionage and the challenge it poses to innovators who partner with Chinese firms, detailing the theft of sophisticated wind turbine control technology by Sinovel from American Superconductor (ASMC). Despite elaborate protections and the lack of technology transfer agreements, ASMC fell victim to intellectual theft from its primary customer. Sinovel accounted for more than two-thirds of ASMC’s revenue–and lost 84 percent of its stock price. ASMC’s experience is a reminder of risks faced by firms whose business depend on strong intellectual property protection competing in China.
Innovation. Read more on how the U.S. capacity to innovate could play a chief role in economic growth.
International Trade and Investment
Economists Challenge Manufacturing Productivity Gains
A new report by the Information Technology & Innovation Foundation asserts that manufacturing job losses since 2000 are driven not by productivity gains. The report challenges the productivity statistics calculated by the Bureau of Labor Statistics and argues that productivity gains are inflated; savings from outsourcing parts to lower cost countries show up as productivity gains in U.S. manufacturing, even though it represents a transfer of production to a foreign factory. The report also calls into question reported gains in computer and electronic production; these statistical gains may be driven by increasing the capabilities of products, not an uptick in actual units shipped.
CFR’s Renewing America initiative recently released a working paper “After Manufacturing: Lessons for a New Reality from North Carolina,” which discussing lessons learned from North Carolina’s responses to the collapse of its manufacturing employment.
International trade and investment. Read more from leading analysts on the debate over next steps in U.S. trade policy.
Education and Human Capital
Federal School Improvement Grants
Education Week discusses two reports issued by the Center on Education Policy (CEP) finding that state officials are “generally optimistic” about the federal school improvement grant program (SIG). SIG funds are distributed to state education agencies which award them to local education agencies who then implement one of four intervention models to rapidly improve troubled schools. The survey shows general support among state education leaders for the major elements of the program: the intervention models, the funding criteria, the focus on student achievement, the competitive grant process, and the level of funding. Concerns remain about the difficulty in replacing principals and teachers, the three-year time frame, and continuing funding as the American Recovery and Reinvestment Act’s support ends.
Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.
Steven J. Markovich holds an MBA from the University of Chicago’s Booth School of Business.