NEW YORK (GenomeWeb News) – President Barack Obama in a speech in Ohio on Wednesday said he wants to enhance, simplify, and make permanent federal tax credits for companies spending on research and development as a way to spur innovation and economic development in the US.
In what was primarily a campaign event for the upcoming mid-term elections that focused on partisan differences on economic issues, Obama brought up his proposal to make the R&D credit permanent, which he has been promoting since his 2008 campaign, as an economy-boosting use of tax policy that will increase American competitiveness.
"Instead of tax loopholes that incentivize investment in overseas jobs, I'm proposing a more generous, permanent extension of the tax credit that goes to companies for all the research and innovation they do right here in Ohio, right here in the United States of America," the president said at the Cleveland event, in which he also announced proposals focused on transportation infrastructure spending and allowing small businesses to deduct capital expenses.
The White House said this week that the proposal will "expand, simplify, and permanently extend the Research and Experimentation Tax Credit."
The Obama Administration's plan for changing the R&E tax credit (interchangeably called the R&D tax credit) is three-pronged: it will expand the credit by around 20 percent, it will simplify the credit formula and increase one of the credits from 14 to 17 percent; and it will make them permanent.
"An expanded, simplified, and permanent R&E credit will help keep the US economy at the cutting-edge of 21st century technologies, while expanding high-tech jobs, encouraging innovation, and increasing future productivity and growth," the White House explained in a fact sheet outlining its proposal.
Expanding the R&D credit by 20 percent will be the largest increase in the history of this policy – with the White House estimating that it would devote around $100 billion over 10 years to additional R&D investment.
Currently, the credit structure requires that businesses choose between a formula for calculating their credit that gives a 20 percent credit rate, and a simpler one that provides a 14 percent credit in excess of a base amount. The Obama Administration proposes increasing the rate of the simpler credit to 17 percent.
"Simplifying the credit in this manner will increase its salience and impact on encouraging investment in research in the United States," the White House explained.
Making these tax credits, which have been extended 13 times since they were created in 1981 and which lapsed at the end of last year, permanent policy will "give businesses the certainty they need to accelerate R&E investments to create jobs today and in the future," according to the White House.