Further Support for a Strong and Permanent R&D Credit

By February 29, 2012Taxation

Recently there was yet another plug for a permanent and strengthened R&D Credit, this time from the Washington Post.  In a 2/25 editorial A Chance for Corporate Tax Reform,” the paper applauded the President for including a permanent and strengthened R&D credit in his tax reform framework. As the Post aptly notes,  “[P]rivate-sector underinvestment in R&D is a market failure requiring government correction.” On this point, the National Association of Manufacturers says bravo! 

More than 30 years of an on again, off again R&D tax credit, is no way to spur cutting-edge technologies and world class innovation in the United States.  And this is particularly true today when the credit has expired for the 15th time. It’s no surprise that the U.S. share of global R&D in this century has fallen from 39 percent to 31 percent given the fierce global competition for R&D investment dollars. Once the best in the world during the 1980s, our R&D tax credit today ranks 24 as countries around the globe have created stronger R&D tax incentives to attract the fuel of innovation:  R&D.  Our global competitors get it. It is not just the economic growth derived from new innovations that makes a country want to be the world’s incubator for the newest innovations, but also the societal spillover benefits and the higher standard of living associated with such innovations.

What manufacturers, who perform nearly 70% of all business R&D in our country know, is that research is inherently risky, costly, and time consuming and a typical R&D project in the manufacturing sector spans five to 10 years.  The United States needs more R&D and the tax code can help.

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