Several so-called conservative think tanks and Department of Commerce officials have proposed taxing the income that universities earn from licensing their research discoveries supported by government grants. By effectively taxing research and development (R&D), the engine of growth, the proposals threaten to discourage innovation in semiconductors, energy, medicines, and other critical technologies. In addition, the government is already getting ample rewards from these R&D subsidies through its many other taxes on the incomes of the innovations generated.
R&D is essential to economic growth as innovation allows us to produce more with the same inputs. That’s why countries across the globe subsidize it including the U.S through tax exemptions and public research spending, including providing universities with research grants. The think tank proposals of this R&D tax would foolishly jeopardize this activity. The CATO Institute has suggested that the federal government should “demand a royalty” from universities that earn money from licensing patents that resulted from taxpayer-funded research. A more extreme proposal from the Brownstone Institute would repeal the Bayh-Dole licensing system altogether. They echo similar calls for R&D taxes from the Department of Commerce that has even surfaced taxing patents.
