Tax Policy, Innovation, and Job Creation

As the American economy looks to recover from the crippling unemployment of the last few years, both states and the federal government are proposing expanded tax credits for research and development to help spur job growth. The current federal R&D (or “R&E”) tax break of 14% is set to expire at the end of the year, and President Obama has proposed to extend the credit and expand it to 20%.  A Treasury Department report released last week forecasted that the new policy would attract “nearly 1 million research workers” by creating a positive environment for innovation and closing tax loopholes that “incentivize investment in overseas jobs.”

The Obama strategy hopes to encourage high-paying research jobs to take root in the United States in an effort to keep the research climate in America internationally competitive.   A bipartisan group of congressmen is supporting the American Research and Competitiveness Act, co-sponsored by Democratic Rep. John Larson of Connecticut, and Republicans Erick Paulsen of Minnesota, and Kevin Brady and Michael McCaul of Texas.

At a nanotechnology factory in Arkansas, Treasury Secretary Tim Geithner touted the new plan as “part of a comprehensive reform of the corporate tax system to make American companies more competitive.  Reform that eliminates loopholes and preferences, lowers the tax rate on investments in the United States, and replaces a complicated muck of temporary provisions, with a more powerful, but more targeted set of permanent incentives, like the R&E tax credit.”

Not all levels of government embrace the expansion of R&D tax incentives, however, as last week New Hampshire voted down a doubling of its tax break citing its tight budgetary situation.  Should the federal measure become law, a report by Information Technology and Innovation Fund predicts it will create “162,000 jobs in the short run,” a $66 billion increase in GDP and 4,000 new patents. Larry Irving, vice president of Global Government Affairs at HP announced his company’s support for the bill, which “would support our efforts as we look to innovate for the future.”

Posted by: John Coit

Sources: Houston Chronicle,, Treasury Department, , The Union Leader, Wall Street Journal

Photo Credit: The Atlantic’s “Finding Work, Finding Our Way: Building the Economy and Jobs of the Future” town hall event, 2/9/2011 posted by flickr user U.S. Treasury Department


One Response to Tax Policy, Innovation, and Job Creation

  1. Pingback: Not Innovation, but The Innovator « America and the Global Economy

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