Seven Innovation Policy Ideas to Spark an Economic Recovery in the U.S.

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foreign earnings to fund new technology R&D in America, or by funding proof-of-concept centers, early stage ventures, expansion of facilities, or to create or expand U.S. manufacturing facilities (including contract manufacturing.) U.S. corporations that repatriate their overseas earnings, but decide against such investments would pay a 5.25 percent tax rate (instead of the existing federal tax rate on repatriated foreign earnings, which ranges as high as 35 percent).

—Encourage more angel investment into startups and emerging companies.
S. 256—the American Opportunity Act—encourages investments by angels (also known as accredited investors) by providing a 25 percent federal income tax credit for investing in early stage small businesses. Connect contends that the credit would augment the capital that angels are currently investing in emerging technologies and expand the number of angel investors.

—Reauthorize the Small Business Innovation Research (SBIR) program.
The House and Senate are negotiating an agreement on reauthorizing federal funding for the Small Business Innovation Research and Small Business Technology Transfer programs. Connect supports reauthorization that would expand the number of viable start-up companies that could apply.

—Retain high-level foreign students who are now required to leave the U.S. after obtaining post-graduate degrees.
Connect maintains that H.R. 399—the Stopping Trained in America Ph.D.s from Leaving the Economy Act of 2011 (the STAPLE Act)—would reverse an anti-competitive workforce policy by exempting foreign-born and highly skilled Ph.D.s (with science, technology, engineering, and math degrees) from visa quotas. Enabling them to stay in the U.S. would help American companies and strengthen their ability to compete with companies based in other countries.

—Encourage the growth of start-up companies by immigrant entrepreneurs.
The StartUp Visa Act of 2011 (also known in the Senate as S. 565 and in the House as H.R. 1114) would extend a “temporary entrepreneur visa” to foreign-born entrepreneurs who have secured backing from qualified American investors. H1-B visa holders could also qualify for the entrepreneur visa as well as foreign entrepreneurs that already have a market presence in the U.S.

—Make permanent recently passed provisions of the Small Business Jobs Act of 2010 to provide long-term certainty to small businesses and their investors.
The Small Business Jobs Act of 2010 (P.L. 111-240) included a temporary suspension of the capital gains tax for investments in small businesses that are held for at least five years. Another part of the bill allows small and medium-sized businesses to access various business credits without negative tax consequences. Both of those features were passed on a temporary basis and are set to expire soon.

More details about these recommendations are embedded in Connect’s full report on the San Diego Innovation Economy for Q2 2011 (beginning on page 33).

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One response to “Seven Innovation Policy Ideas to Spark an Economic Recovery in the U.S.”

  1. J. Keeney says:

    Another suggestion: Revise the disasterous Hatch-Waxman law of 1984 to allow “perma-patents” on all newly marketed new chemical and biological drug entities, coupled with a program of gradual price declines on all such medicines and older patent-protected drugs. This would incentivize companies to invest more in drug R&D, as well as lead to lower introductory prices on new drugs.