Donation Tax Credits
September 12th, 2008
Question: Is anyone in favor of what I call “Constructive Capitalism?”?
Constructive Capitalism would enable the federal government to treat subsidies (grants and tax credits) as investments, not donations. Why doesn’t the government set up an investment corporation that would make decisions on grants and subsidies and take equity positions when it makes them available to entities engaged in potentially profitable research and development projects? If there is a payoff, the taxpayers would share in it.
One of the first HIV/AIDS drug was developed by Yale University researchers whose work was supported by a federal grant. When the drug worked and was taken to market, the University and/or the scientists got the patents and all the royalties. The government got $-0-.
I’m not talking about confiscatory participation, but if the government funds 20% of the cost of a project, whether it’s in pharmaceuticals or energy (or anything else), why shouldn’t taxpayers share in the rewards if the project works out well?
Answer: I’m not sure if I would call it constructive capitalism, but I agree with the concept.
I think if subsidies were handled as stock investments, with the federal government acting as a stockholder, it could help in several ways. It would encourage better federal oversight of these investments and would also put money back into the treasury–as you suggest.
A possibly related example of what you suggest is the ownership of the national railroads in Canada. Instead of operating them as a national entity the government acts as the sole stockholder, allowing management to concentrate on profitability.
I would like to see much more investment in railroads in the U.S., particularly in improving passenger services–which are all but nonexistent in parts of the west.
Another approach that I would suggest would be longer-range investment programs. I would think a corporation could be formed to manage federal investments and that its role would include developing both long and shorter range investment strategies with very limited Congressional influence.
Certainly there are opportunities for corruption wherever large amounts of money are involved, and I’m not entirely certain how one would avoid corruption in a federal investment corporation, but this should be approached either through an inspector general system or by very concentrated Congressional oversight through committees.
An interesting idea and one that is worthy of consideration. The federal corporate experience is not inspirational, however, witness the USPS and Amtrak as examples of good ideas gone bad.
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Tax Credit Donation Speech
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