Members of Congress and the Administration seem to agree on what manufacturers have long known: enhancing investment in research and development, or R&D, drives economic growth. But that growth cannot be sustained without a permanent R&D incentive.
The uncertainty of an on-again, off-again tax credit upends the innovation, new product development and job creation that manufacturers contribute to the economy. When there is no telling whether the incentive would be around for the entire length of a manufacturer’s R&D project, investment in the U.S. manufacturing base suffers. A JP Morgan Chase report released in August found that private spending on R&D slowed to 2.4 percent in 2013. We cannot allow investment to tumble any further. With the credit set to expire for the sixteenth time at the end of the year, that outcome becomes increasingly possible.
That’s why the NAM is advocating a permanent and strengthened R&D incentive as one of our priorities for comprehensive, pro-growth tax reform. The United States has been a leader in promoting R&D for over 30 years, but more and more countries have provided greater certainty for businesses in recent years by enacting permanent—and more generous—R&D incentives. A strong and permanent R&D credit will allow the United States to remain competitive in the global race for R&D investment dollars, particularly as manufacturers are courted by other countries with more generous and more stable R&D tax incentives and lower corporate tax rates.
The certainty provided by a strengthened, permanent R&D incentive would enhance its incentive value and help ensure the United States’ leadership in global innovation.
Christina Crooks is the director of tax policy for the National Association of Manufacturers.