After my discussion in class about Trump and his effects on the Tri-City area I thought I would look into the web for some more information on Trump and his current efforts and what effects it would have, It is interesting because although Trump is looking to improve business for companies in the states it doesn't necessarily mean that it will have a positive effect on the tech sector and innovation.
The plan that Trump looks to implement has some of these detail:
It calls for a cut in the U.S. corporate tax from 35 percent to 20 percent, a controversial “border adjustment tax” to penalize importers and reward exporters, and a more advantageous way for companies to account for capital investment. In speeches, Trump has suggested an even lower corporate tax rate of 15 percent. (Burrows, 2017)
These types of changes will assist tech companies, but only the ones that are well established and have already created a market for themselves. Smaller tech companies just starting out are going to run into issues getting off the ground. Not only this, but the reason smaller companies will struggle is because they have yet to begin skirting the regulations within the states. Burrows explains that "smaller companies that could use a cash infusion to fund R&D typically don’t have big offshore reserves, either because they aren’t old enough to have amassed them or they don’t have departments of sophisticated tax experts to exploit the regulations" (2017).
Furthermore this plan if instigated would mean that "companies would not have to pay any tax on goods they export, but they would have to pay for parts or services they import" (Burrows, 2017). This changes the way Silicon valley or alley function if they are going to be charge more for the services they import. This is only a bit of what is mentioned in the article, but it was very interesting.
Source
It seems as though Trump is pushing localized business on a scale of all business rather than just manufacturers. I am interested to see how this will pan out to electronic goods, and non-physical software (pirated or cloud-shared), as these imports are not necessarily monitored or logged by anything more than email exchanges and file transfers. In terms of more physical resources that tech companies and startups are looking to use, I agree with your point that it will benefit bigger companies and has the possibility to cripple smaller ones.
ReplyDeleteThis new way of taxing imports will definitely hinder the capabilities of startups that have truly advanced ideas, with no way of financing the equipment they need to do their work. In this case I am referring to advanced computers and other technologies, like 3D printers, that can be built easily and cheaply, but for the most part are completely outsourced in terms of parts and working components.
It will be interesting to see as well if Trump's dreams of fortifying America's manufacturing sector will actually come true, and they will be able to reach a level of manufacturing on the scale of many of the world leaders on the other side of the world.
Good observation, Stuart. It's interesting to see how taxation can be a tool government utilizes to drive growth in a specific sector - in this case, large/established organizations (most likely because that is where Trump will get the biggest RIO in terms of jobs). This reminds me of Mazzucato's notion that governments do 'pick winners' in the economy depending on current objectives.
ReplyDeleteI think you're right - this policy is not directed towards small/growing companies and will have little to no effect on generating innovation. When I think about these types of policies and Donald Trump's anti climate-change stance, I worry about emerging sectors like clean-tech and the challenges those companies will face in funding R&D and commercializing research during this administration.