Streamlining and Codifying the R&D Tax Credit

“In a weak economy, we should be doing everything we can to spur on innovation and the type of family-wage jobs that increased research and development will create,” said Congressman Jerry McNerney (D-CA) in a press release announcing the introduction of legislation that would streamline the R&D tax credit and make it permanent.

According to the National Dialogue on Entrepreneurship, the Innovation Tax Credit Act (H.R. 5681) takes the five different tax credits and simplifies them into one Alternative Simplified Credit, increasing the total credit from the current 16 percent to 20 percent by 2009. Since its introduction in 1981, Congress has renewed the current R&D tax credit 12 times, stifling future investment in R&D because of constant uncertainty about its future. The bill would eliminate this problem by making the credit permanent.

The R&D tax credit is an engine of economic growth, according to studies showing a two-to-one return on investment through the tax credit. The credit can also attract and maintain research investment in the U.S. when other countries may offer attractive research incentives.

Any policy that spurs private sector investment in innovation is a good one, as Science Progress contributors have argued previously. In “The Flashing Light on America’s Dashboard,” Tom Kalil recommends making the R&D tax credit permanent. In “Science and Technology Is the Answer,” Robert Atkinson explains how the U.S., which once had the most generous R&D tax credit in the world, now sits in 16th place today. To stop the bleeding, he suggests doubling the regular credit and the Alternative Simplified Credit.

The bill, introduced on April 2, was referred to the Ways and Means Committee for further consideration.

Tags: Innovation, legislation

Comments on this article

You can skip to the end and leave a response. Pinging is currently not allowed.