On the big stuff, the GOP tax proposal gets it wrong. However, there may be a significant issue on which it gets it right. But whether it did or didn’t is really anyone’s guess.
The GOP bill proposes to repeal IRC § 45C that provides a 50% tax credit for qualified clinical testing expenses incurred in testing of certain drugs for rare diseases or conditions, generally referred to as “orphan drugs.” The Republican JCT budgetary analysis (text page 42, pdf page 48) calculates that the repeal of Section 45C would bring in $54 Billion in additional tax revenue over the 2018-27 period.
So, is the repeal of Section 45C a good thing or a bad thing? I can say with absolute assurance and with no possibility that I will be contradicted that . . . I don’t know. And likely neither do the proponents of the repeal of Section 45C.
The orphan drug program has come under serious and thoughtful criticism. See for instance this article from Kaiser Health Network. As the article points out, however, FDA Commissioner Scott Gottlieb has promised reforms in the way that the FDA deals with orphan drugs. And, the GAO has promised an investigation.
The point here is that the GOP needs offsetting revenue to mitigate its proposed massive tax cuts for the wealthy. It is so hellbent on delivering those tax cuts that it throws out completely a tax benefit that is intended to advance a popular goal. It may very well be that this tax benefit has been abused, but we won’t know that this is the case with any assurance until we see the results from the reforms that the FDA has already instituted and the GAO study. More than likely, the program needs to be reformed, but not thrown out entirely. Of course, we won’t be able to make an informed conclusion by December. And we can’t wait until the facts are in before we give the rich their holiday gift.