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Statement by Robert Atkinson on the President’s Plan to Make Permanent the R&D Tax Credit

September 7, 2010

“It is welcome news that President Obama will ask Congress to expand and make the research and development (R&D) tax credit permanent. This will better enable the U.S. compete globally and make it clear that the United States has finally gotten off the sidelines in the fight for global economic competitiveness.

While expanding the credit from 14 to 17, as has been reported, makes sense. ITIF thinks an even more generous credit makes even better sense. ITIF estimates that expanding the credit from 14 percent to 20 per¬cent would create 162,000 jobs in the short to moderate run and an additional, but unspecified, number of jobs in the longer run - many of them high-skill, high wage jobs.

Given that the United States created the R&D credit 30 years ago, it is astonishing how the U.S. has allowed it to whither over the years. The United States ranks 17th (and 19th for R&D tax generosity towards small businesses) amongst the 30 OECD nations. With R&D the credit expired, the U.S. actually ranks last in R&D tax incentives. No wonder research and manufacturing jobs are growing faster in many other nations than in the United States.

U.S. corporate taxes are the second highest among developed nations. So we must take steps to make U.S. businesses, large and small, more productive and competitive. The President’s proposal on expensing would encourage capital expenditures and create jobs. A more generous R&D credit would make the U.S. more attractive as a global destination for investment, thus helping us retain the most desirable jobs today and enhancing our R&D capacity for tomorrow. ITIF estimates that expanding the credit from 14 to 20 percent would over a number of years actually pay for itself in expanded federal tax revenues.

The business community and organized labor, Democrats and Republicans have supported the R&D credit for more than a generation. Whatever their impulse for partisan inaction as we approach the mid-term elections, lawmakers from both parties need to seize this moment and make the R&D credit permanent and more generous.”

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The Information Technology and Innovation Foundation (ITIF) is an independent, nonprofit, nonpartisan research and educational institute focusing on the intersection of technological innovation and public policy. Recognized by its peers in the think tank community as the global center of excellence for science and technology policy, ITIF’s mission is to formulate and promote policy solutions that accelerate innovation and boost productivity to spur growth, opportunity, and progress.

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