Not long ago it would have been hard to imagine a Republican President demanding government ownership in a private company, but here we are. And now the Trump Administration is toying with a tax on patents too — meaning, a tax on innovation.
President Trump on Friday trumpeted that the U.S. government will take a 10% equity stake (worth about $8.9 billion) in Intel, the struggling maker of computer chips.
The President made CEO Lip-Bu Tan an offer he couldn’t refuse. “He walked in wanting to keep his job, and he ended up giving us $10 billion for the United States,” Mr. Trump said of their meeting this month.
A few weeks ago Mr. Trump demanded Mr. Tan’s resignation after Arkansas Sen. Tom Cotton alleged he had business entanglements with China that posed a national-security threat.
The Administration was holding up $9 billion in Chips Act and defense funds that the Biden team had promised Intel, giving the President leverage over Mr. Tan.
The CEO then made a pilgrimage to the White House.
Mr. Trump on Friday recounted their meeting: “I said, you know what, I think the United States should be given 10% of Intel,” and, “I think it would be good having the United States as your partner. He agreed.” By partner, the President means boss.
Federal support may help shore up the chip maker’s balance sheet in the short-term. But a big risk is that the government will direct Intel’s business in a way that will make it harder for the company to become competitive in chip manufacturing and design.
The Administration says the deal won’t include a seat on Intel’s board or “governance or information rights,” and it will mostly vote its shares with Intel’s board.
But government support will ease the imperative for Intel to become more competitive. That’s one reason China’s partially state-owned Semiconductor Manufacturing International Corporation has struggled.
In the name of competing with China, the U.S. is imitating its model of state-run business. Washington is becoming Chinatown.
Mr. Trump accused Kamala Harris of being a socialist, but the Biden Administration never nationalized companies. The Biden team did propose allowing the government to claw back some Chips Act money from companies that made “excess profits,” but this drew opposition from Congress.
Why aren’t Republicans pushing back on Mr. Trump’s Intel deal? They might consider how the next Democratic President could use the government’s stake to press the left’s political imperatives — Intel profits to build low-income housing? Statism is gaining currency on the political left and right, resulting in a bizarre fusion of ideas.
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Now consider the Commerce Department’s mooted proposal for a patent tax that would amount to a levy on wealth and innovation.
Congress has delegated the U.S. Patent and Trademark Office authority to set patent fees within certain parameters. They must be reasonable “only to recover the aggregate estimated costs” of USPTO activities. The agency currently charges flat fees to apply for, maintain and renew patents.
Trump officials are reportedly discussing overhauling this system by imposing a tax of 1% to 5% on the government-assigned value of patents. The idea is for the government to reap some of the reward on an invention. This would reduce the return on innovation, resulting in less of it. That’s what taxes do. But encouraging investment and innovation is why Congress provided full expensing for research and development in the recent tax bill.
