Donald Trump’s tech agenda — judging from his convention speech last week — is pretty straightforward: Cut taxes and reduce excessive regulation. Hillary Clinton is proposing a 7,000-word laundry list of initiatives for harnessing the power of technology and the Internet “in a way that works for all Americans…”
Taxes are a good place to start, because they are a cost of doing business that firms attempt to recover in pricing the goods and services they offer to consumers. Taxes can also diminish the resources that corporations have for investing in research and development or in plant and equipment.
The U.S. has the highest corporate tax rate of any of the 34 industrialized countries that comprise the Organization of Economic Cooperation and Development (OECD). Whereas the OECD average is 24%, the top marginal corporate tax rate (federal) in the U.S. is 35%.
Hillary Clinton promises to close corporate tax loopholes, but says nothing about reducing rates. She would therefore ensure that corporations face higher tax bills. Donald Trump would reduce the top corporate tax rate from 35% to 15%.
Besides a corporate tax rate that is too high, there is also a long history of discriminatory taxation of telecommunications services in the U.S. Telecom has traditionally been taxed at higher rates in the U.S. than other goods and services — not like a basic necessity, but like alcohol and tobacco. The Tax Foundation estimates that taxes account for 18% of the average wireless customer’s bill — almost 2.5 times higher than the general sales tax rate. Making mobile broadband services more affordable would be as simple as reducing these excessive taxes.
Earlier this year the Federal Communications Commission repudiated some 20 years of bipartisan telecom policy by voting along party lines to regulate the Internet like a public utility under Title II of the Communications Act of 1934. Mrs. Clinton strongly supports the FCC decision.
The FCC’s decision to regulate the Internet like an 18th century railroad has been criticized by many experts for its potential to diminish network investment and innovation. The “probable direct effect on investment in broadband seems unambiguously negative,” according to one of the judges who heard testimony when the FCC’s rulemaking was reviewed in a federal appellate court. “Critically,” wrote the other two judges, “we do not ‘inquire as to whether the agency’s decision is wise as a policy matter.’”
Mrs. Clinton cites a 2013 report from the McKinsey Global Institute In the introduction to her technology platform estimating that 12 technologies could have a $14–33 trillion economic impact per year in 2025. What she may not have noticed is that the technologies expected to have the greatest impact — accounting for approximately half of the total economic impact — are Internet related, i.e., mobile Internet, Internet of Things and the cloud. The FCC ignored arguments that there is room for innovation in these spaces that could be in jeopardy as a result of public utility style regulation.
Taxes and excessive regulation have consequences for broadband availability and pricing. Mrs. Clinton is concerned that millions of American households, particularly in rural areas, still lack access to any fixed broadband provider, and she believes that American consumers pay more for high-speed plans than consumers in some other advanced nations. Actually, between 2013 and 2014, the number of U.S. households with high-speed fixed broadband coverage went from 84% to 89%, according to the Federal Communications Commission. Whereas during the same period, it went from only 62% to 68% in the European Union. And the gap between rural and non-rural coverage is smaller in the U.S. than it is in Europe.
The focus of regulation in Europe is on cheaper prices. But leading European broadband providers are warning that the European regulatory framework should have a new primary objective that emphasizes the long-term benefit to consumers and economic development that comes from increased broadband deployment.
Commendably, Mrs. Clinton does call for a reduction in regulatory barriers to the private provision of broadband services that include local permitting processes and access to existing infrastructure such as conduits and poles.
Both Mr. Trump and Mrs. Clinton mention the need to do something about protecting intellectual property. He would focus on “stopping China’s outrageous theft of intellectual property,” while she highlights the need to modernize copyright licensing and maintains her opposition to proposals like the ill-fated Stop Online Piracy Act (SOPA) — an attempt to update the Digital Millennium Copyright Act (DMCA). Enacted in 1998 before audio and video became pervasive on the Internet, DMCA imposes a brutal compliance burden on artists and producers that couldn’t possibly have been foreseen in the mid-to-late 90’s. Copyright enforcement should be modernized so it “works for all Americans,” as well.
The Clinton campaign has done an admirable job of cataloging, describing and taking a position with respect to most of the current technology policy issues one can think of. However, her platform simply adds up to higher taxes and more regulation. If we’ve learned anything over the past 20 years, that is that the least regulated and the least taxed sectors of the information economy have flourished the most. This is something that Donald Trump seems to understand.