My own view of government precludes me from sharing the ultimate goal of a government should initiate a National Network for Manufacturing Innovation (NNMI). I tend toward the Jeffersonian view of government — that government which governs least governs best. I am also a big believer in the power of incentives. In all walks of life what is obtained is what is incentivized. If employees know how they will be evaluated, for example, even a mediocre employee can achieve high marks by performing tot the evaluation. Tax policy is another excellent example, as is the patent system.
For better or for worse, the United States has not incentivized manufacturing. In fact, the incentives associated with manufacturing are to off-shore manufacturing rather than do it in the United States. There are too many bureaucratic hurdles to opening a business in the U.S., particularly a manufacturing facility. Anyone who doubts this needs to read Great Again: Revitalizing America’s Entrepreneurial Leadership.
Today’s Supreme Court ruling on Obamacare is historic. This issue has dominated political and private discourse for the past several years in America and, therefore, it is unrealistic to believe any legal commentator could resist the temptation to comment or opine. While Obamacare and the Supreme Court decision have nothing to do with intellectual property, I will, to the best of my abilities, turn this into a tongue in cheek patent commentary. Of course that is after I bash the Supreme Court. So liberals and others who believe the Supreme Court knows anything about anything should probably skip Part 1 and jump right to Part 2 of the article. I had a blast writing it. Hopefully you will have as much fun reading.
Part 1: Not Intended for Liberal / Supreme Court Consumption
A majority of the Supreme Court finally placed a meaningful limitation on the rampant, intellectually dishonest and terribly troubling use of the Commerce Clause to justify everything Congress ever wants to do. Unfortunately (at least in my opinion), Chief Justice John Roberts got in touch with his inner liberal and decided that the individual mandate is constitutional under the taxing power granted to Congress in the Constitution. Rather peculiar given that during the rancorous debates and ultimate passage of the bill the Obama Administration and Democrats in Congress repeatedly proclaimed this was not a tax on the American people. To be fair, the Obama Administration did seem to argue it both ways on the tax issue depending upon the forum. I guess arguing in the alternative paid off even if Congress and the President were dishonest with the American people in public.
Several weeks ago, on December 11, 2011, U.S. Commerce Secretary John Bryson set out his vision for how the Department of Commerce can best partner with the business community to support President Obama’s jobs agenda. If the past is any indication of the future, President Obama and it senior team will do whatever they can leading into the new year to jump start the economy and get Americans back to work.
At his speech at the U.S. Chamber of Commerce, Commerce Secretary Bryson outlined his top three priorities to help American businesses “build it here and sell it everywhere,” focusing on supporting advanced manufacturing, increasing our exports, and attracting more investment to America from all over the world. The key to emerging from the Great Recession is, of course, manufacturing. Manufacturing jobs have left the U.S. in favor of more business friendly climates in other countries, taking with them U.S. jobs and U.S. intellectual property. But moving into a Presidential election year will government be able to do anything that is at all likely to help?
The U.S. Chamber of Commerce conducted two small business focus groups on April 1, 2011, in Philadelphia, as well as a national survey of small business owners through interviews with 900 businesses April 8 – 12, 2011. The findings from this study make up the inaugural quarterly “Small Business Outlook Survey,” and paint an unfortunately bleak picture of the collective outlook of small businesses moving forward.
Small businesses are the backbone of the nation’s economy and those that are most likely to engage in job creation. Unfortunately, the small businesses surveyed tell a tale of little or no job creation over the next 1 to 3 years, and in fact suggest there will be more layoffs coming. The respondents see too much uncertainty in Washington, DC, too many regulations and a number of other matters (i.e., the deficit, debt, health care and taxes) as significant impediments to job creation. This on the heels of a disappointing jobs report for June 2010, downward revisions of the number of jobs created in April and May, and unemployment rising to 9.2%, this Chamber survey only piles on the continuing terrible news for the economy. With Congress bickering over the obvious — namely that we simply cannot spend money we don’t have and need to start spending less than we bring in to cut the deficit — it doesn’t seem there is likely to be any good news on the horizon.
Earlier this year we learned that General Electric (NYSE:GE) paid no taxes for 2010. See G.E.’s Strategies Let It Avoid Taxes Altogether. Yes, the largest corporation in the United States had a very good 2010. They booked over $14 billion in profits, with over $5 billion coming from U.S. operations, yet they paid not a dime in taxes to the Federal Government. To add insult to injury, General Electric was able to claim a tax benefit of $3.2 billion for 2010, making its effective tax rate for 2010 substantially negative.
But General Electric was not the only large U.S. corporation not to pay taxes. According to Citizens for Tax Justice, General Electric had some company. In fact, American Electric Power, Dupont, Verizon, Boeing, Wells Fargo, FedEx and Honeywell all had tax rates between -0.7 percent and -9.2 percent for the stretch between 2008 to 2010. See Study finds many corporations pay tax rate of effectively zero.
On the other hand, the United States Patent and Trademark Office continues to have user funds siphoned off, making the USPTO a much larger taxpayer than the largest U.S. corporations.
By now many have undoubtedly heard something about the ongoing budget battles on Capitol Hill. As a government shutdown was averted at the 11th hour on Friday evening, just as I predicted, attention has already started to turn to the much larger economic battles that loom, namely the vote to raise the debt ceiling and the fiscal year 2012 budget. In fact, Congressman Paul Ryan (R-WI) released the House Republican’s budget proposal for fiscal year 2012 early last week. The plan dubbed The Path to Prosperity already has a multitude of supporters and a multitude of critics. As this has started to unfold we will undoubtedly hear some ridiculous, half-baked comments from those who think they know better. The one that probably bothers me the most is one we hear so frequently: All we need to do is go back to the Clinton tax rates. It is amazing to me that there are those who can say this with a straight face.
President Obama delivers his weekly address on Feb. 5, 2011
In his February 5th radio address, President Obama noted that “If we make America the best place to do business, businesses should … set up shop here, and hire our workers, and pay decent wages, and invest in the future of this nation. That’s their obligation.”
I agree. But government has an obligation, too. Is it doing all it can to truly make America the best place to do business?
Consider Evergreen Solar, which until last month was one of America’s largest solar panel makers. On January 14th, it shut down its Massachusetts factory and sent 800 jobs to China. This leaves only Silicon Valley’s Solyndra making solar panels in the U.S., and it just shut down one of its two production facilities.
Some will question me writing about tax policy, but the undeniable truth is that tax policy is enormously important to businesses of all sizes, including small businesses. Tax policy also affects job creation, because anytime businesses have to pay more and retain less that increases operating costs, which necessarily leaves less to reinvest in the business. This affects all sorts of things, including but not limited to lay-offs, a failure to create jobs and the investment in the creation of innovation. History shows us that when business is bad and revenues decrease businesses of all sizes typically cut back on activities necessary to innovate. When you look for less you find less, so this can and does negatively impact innovation. Innovation, job creation and a variety of matters important to small businesses are common topics here on IPWatchdog.com. With this backdrop I leap to take on the un-reported story relating to the fact that expiration of the Bush tax cuts will impact virtually all small businesses, not just the 3% of small businesses continually, and inaccurately, stated by the Democrats.
Back in November of 2009, I wrote Obviously Non-obvious and Patentable Inventions Part I. I have for some time wanted to return to this and continue with Part II, which really is implied explicitly if you are going to call something Part I. In any event, Part I was a combination of a rant about KSR tied together with frustration that the NCAA and otherwise brilliant (or so they tell us) University President’s cannot figure out a way to concoct a Division I (I refuse to call it Football Bowl Subdivision) playoff for College Football. Obviously, a Division I College Football playoff must not be obvious because it if were you would think a bunch of bright people in ivory towers would have figured out how to make it work, particularly given that there would be more money to be made off the labor of unpaid (except perhaps for USC players) amateur college athletes. With there being college playoffs for every other sport, including in other divisions of college football, the conclusion must be that a Division I playoff must not be “common sense” and, therefore, must be non-obvious. Picking up on this theme and focusing on things that at first glance seem incredibly obvious but must not be at all obvious given that those who are exceptionally smart can’t figure them out, I thought with tax season right around the corner it might be worthwhile to explore method of stimulating the economy by cutting taxes.