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Archive for March, 2012

April Fool: U.S. to Have Highest Statutory Corporate Tax Rate

As of April 1, when a change in Japan’s tax law goes into effect, the United States will have the highest statutory corporate tax rate of any industrialized nation. It is bitterly appropriate that this happens to be the day we mock foolishness. There is a race underway for global competitive innovation advantage. More and more nations are beginning to understand their tax codes are among the most valuable tools they have to win that race. They understand that higher corporate taxes reduce investments, new business start-ups, and inward foreign direct investment. In the last 30 years, corporate tax rates for OECD nations and China  have declined from nearly 50 percent to levels less than half that. Even formerly high-tax countries such as Sweden have reduced their corporate taxes dramatically. Unfortunately, the United States is not following suit. The good news is that the Obama Administration and many in Congress seem increasingly aware of this new global reality and have begun to look into meaningful corporate tax reform. The bad news is that almost all proposals for corporate tax reform are premised on revenue neutrality. The problem with revenue neutrality is that it is likely to neutralize potential benefits of reform. Simply lowering the statutory corporate rate, but then cutting deductions and credits to pay for it, will do nothing to address the fact that the U.S. also has a very high effective corporate tax rate relative to our competitors. Moreover, cutting key incentives like the domestic production credit, the R&D credit, and accelerated depreciation would reduce the incentive for companies to make the investments needed to restore U.S. competitiveness.

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Rebuild America Act Advances Range of Critical Policies to Revitalize U.S. Manufacturing

On Thursday, March 29, 2012, Senator Tom Harkin (D-IA) introduced new legislation in the Rebuild America Act that contains a number of important policy provisions to revitalize American manufacturing. In particular, the legislation requires the President to develop a national manufacturing strategy and submit that strategy to Congress. (While the Obama Administration did release A National Strategic Plan for Advanced Manufacturing in February 2012, the Bill would ensure that this is not a one-off occasion, and that the strategy should be updated on an ongoing basis by future Administrations). An ideal U.S. manufacturing strategy would ensure the United States implements smart policies regarding the “4Ts”—tax, technology, trade, and talent—as ITIF calls for in the Charter for Revitalizing American Manufacturing in order to ensure that the United States offers the world’s most competitive and attractive manufacturing environment.

One of the best proposals in the Rebuild America Act is its call for the creation of sector-based Technology and Innovation Centers (TICs). These Technology and Innovation Centers would be centers of applied research and development on specific technologies or sectors (such as robotics, wireless technologies, optics, foundries, etc.) that would particularly help small and medium-sized (SME) manufacturers bridge the gap between R&D and manufacturing efficiency at scale. The Bill’s proposal calls upon the Secretary of Commerce to provide grants to coalitions of stakeholders that would partner with national laboratories or institutes of higher-education to launch the TICs. While the actual centers might be located near the geographic center of gravity of an industry—such as locating a TIC for optics near Rochester, NY—the critical point is that the TICs would serve firms beyond their local/regional footprint, so that an optics center might be in Rochester, but would serve optics firms or firms with optics needs around the nation.

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DNS Integrity in the Real World

Those who followed the SOPA and Protect IP copyright law debate in December and January will recall an argument raised by certain members of the tech sector to the effect that enlisting the Internet’s Domain Name System (DNS) in the fight against pirated goods would undermine Internet security. While the SOPA critics said that it’s OK to use DNS blacklists to prevent access to malware sites, sites that sell Hollywood movies without license have an entirely different character.

Critics also argued that beside all of that, DNS blacklisting would be completely ineffective because users would simply shift from legitimate DNS services provided by their ISPs to rogue services operating offshore and outside the reach of U. S. law. Some critics, such as former Bush Administration official Stewart Baker, argued that without any user intervention at all Secure DNS would magically go “casting about the Internet” looking for rogue DNS services to reach the pirate video sites of the user’s preference.

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My Free Unauthorized Use, Trespass, Conversion and Misappropriation Summer Vacation: Don’t Worry It’s Not Stealing

My wife and I are in the saving money mode since unfortunately our son is likely to go to some pricey liberal arts college next year and sock us with a huge bill. But we don’t want to give up on our summer vacation. After all we deserve to have fun too. So after reading  The New York Times op-ed by law professor Stuart P. Green entitled “When Stealing Isn’t Stealing” I came up with an idea, that if I say so myself, is brilliant. I will have a vacation based on unauthorized use, trespass, conversion and misappropriation, since according to Green, it’s no longer stealing when I use non-rival, intangible goods (e.g., when I download movies, video games, software, books, music, etc., without paying for them). It's unauthorized use, trespass, conversion and misappropriation.

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Freeing Federal Spectrum

The NTIA released its report on clearing the 1755 - 1850 MHz spectrum of government allocations today, and it’s good news and bad news. The good news is that some government agencies are playing ball, taking the exercise seriously and doing their best to increase the amount of spectrum available for general-purpose commercial networks.  The NTIA says the entire band can be made available within ten years, and significant portions of it much earlier. They caution that some sharing is going to be necessary for quite some time in a few areas, but they’re hoping that the sharing is something both the commercial sector and the government can live with. The bad news is that DOD and the FBI still insist they have applications of such importance that they can’t live without the allocations of spectrum they currently have. I’d like to have been a fly on the wall during the negotiations between the agencies and the NTIA in order to confirm the suspicion that I get from the report that the civilian agencies sent spectrum experts to talk to NTIA’s people while DOD and DOJ sent bureaucrats. That’s what the report seems to indicate. The primary issue in reallocating spectrum from government use is whether the allocation makes sense any more, and the secondary issue is where in the spectrum map the government’s assignments should be.

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Fears of Economy-Wide Labor Shortages Are Completely Groundless

Given how the U.S. media has evolved it’s always good to be a contrarian if you want to get news coverage. Even if you are wrong. Perhaps even better if you are wrong.  Case in point is a new interview with Minaynville’s Conor Sen on Breakout, who claims that we're less than a decade away from the economy’s biggest challenge: not too few jobs for American workers, but rather a workforce too small to fill the demand. This is not a new perspective, although he’s probably the first to say this since the Great Recession. In 2001, Elaine Chao, President Bush’s Secretary of Labor, warned that, “Our new challenge is a scarcity in the one fundamental resource that drives every economy in the world: the workforce ... If the coming worker shortage in the next several years is not addressed, the federal budget, the economy, and working taxpayers will pay a huge price.” Business Week concurred, stating “another big freight train is coming down the track in the U.S. economy. That’s the tremendous long-term shortage of labor we are facing.” The same argument was used to argue the U.S. economy needs the offshoring of jobs to low wage nations to cope with an impending labor shortage.

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Proposed Privacy Law for Employers Using Facebook a Step in the Right Direction

Various news outlets recently published articles discussing an emerging trend in hiring practices where employers are asking potential employees for their social network or email account credentials so that they can review the potential hire’s private online profile. Not surprisingly, many people have objected to this practice, noting the intrusiveness of the request and the inherit coerciveness of asking for this information during a job interview. In response, Sen. Blumenthal (D-CT) announced yesterday that he was planning to introduce legislation to prohibit employers from asking potential employees for their social network login credentials.

Privacy activists often argue that government should concern itself with the mechanics of how the private sector manages data rather than prevent harmful uses of data, as the Blumenthal legislation attempts to do. However, this is like asking legislators to write laws that restrict how people move their arms and legs, rather than writing laws that prohibit assault and battery. The reality is that privacy regulations, no matter how well-intentioned, cannot guarantee privacy or prevent accidental disclosures or theft of personal data. As I have argued before, legislators should focus on restricting uses of data that harm individuals (e.g., credit discrimination), rather than restricting particular technologies or practices (e.g., behavioral targeting). Instead of fruitlessly trying to lock down data, legislators should focus on creating protections to minimize or eliminate harm to consumers if private data becomes public.

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Spectrum Policy Collides with Competition Policy

Today’s Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights hearing on the proposed transfer of fallow spectrum from cable companies to Verizon sheds light on how poorly traditional competition policy fits the networking business. The essential fact of the hearing is this: If the deal goes through, Verizon will have the second largest allocation of spectrum in the mobile broadband business, behind Sprint/Clearwire and ahead of AT&T. If the deal does not go through, Verizon will still have the second largest spectrum allocation. According to critic Tim Wu, this deal “affects the very competitive structure of the communications industry.” Do you see the problem?

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A Story about Energy Innovation Policy: Envia Systems

Since the ARPA-E Energy Innovation Summit, emerging next-generation electric vehicle battery company Envia has been gaining headlines because its technology holds the promise of much cheaper electric cars within a few years. Yet a recent story in Forbes adds to Envia’s intrigue.  It brings to light the strengths, weaknesses, and controversial debates that make up America’s climate and energy policy discourse.  In fact, it’s a compelling case study on how to make clean energy cheap and globally viable, while also highlighting in stark fashion areas of technology development in great need of policy support.

Electric vehicle batteries – or batteries in general – are comprised of three basic parts: the cathode, anode, and an electrolyte.  Traditional lithium-ion batteries, which are used in most electric vehicles, utilize lithium-cobalt oxide cathode and usually a graphite anode. While this arrangement provides a modest energy density, the battery packs still must be large and costly in order to power a vehicle.  So much so that current electric vehicle battery packs often represent almost half the sticker price of a car. And even at these large sizes, they don’t last very long – typically

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The Startup Act Has Promising Implications for Clean Energy Innovation

Although Senators Moran and Warner may not have had clean energy in mind when they wrote the Startup Act, there is no question that the bill could prove beneficial to the national environment for clean energy innovation. In fact, Senator Moran might as well have been speaking specifically to clean energy innovators when he talked about the bill at South by Southwest... Read the rest