As American companies TCC members invest billions in domestic research and development collectively and intend to continue doing so as long as possible. The U.S. first adopted the R&D tax credit in 1981. For the past 29 years it has encouraged American companies to do more domestic research and hire more scientists and engineers. Impressed by its effectiveness, other nations copied the legislation and introduced their own credits to attract investment to their shores. Over time, the U.S. credit slipped from the world’s most effective to 24th best, behind such nations as Japan, China, India and Korea. So while other nations encourage innovators to hire more research and development staff in their markets, American policy makers oftentimes effectively discourage such investments through their inaction and inconsistency.
The R&D credit represents good and effective policy. A recent study by the Information Technology and Innovation Foundation found that increasing the Alternative Simplified Credit to 20% would lead to 162,000 additional jobs created or retained in America, $90 billion in additional economic output and a 0.64% increase in annual productivity. At a time of economic and fiscal uncertainty, it’s important for lawmakers to clearly spell out a long-term policy that includes a permanent extension of the R&D Tax Credit. Doing so would provide businesses with certainty, preserve current jobs, and create new opportunities.