A policy compromise that lets companies repatriate funds at a low tax rate, provided they spent at least half of these funds on research and development, would accomplish the mutual goals of freeing up foreign earnings and boosting research, while not contributing to the federal debt-to-GDP ratio.
Science and R&D
New Evidence from Canada: Tax Policy Does Affect Research Spending
In “Do Tax Credits Affect R&D Expenditures for Small Firms? Evidence from Canada,” the authors find that firms that qualified for a larger tax credit did spend more on R&D in the following years compared to firms of similar income whose tax situation did not change.
Congress Should Make the R&D Tax Credit Permanent
Congress has an opportunity now to permanently extend the research and development (R&D) tax credit, an essential tool for promoting innovation, competitiveness and economic growth. While neither the timing nor the substance of the proposed legislation is perfect, Congress and the president should take action this year. Although it would be preferable to treat this business provision on its own, political realities dictate that Congress should take the best deal that it can and make the credit permanent now.
How the Silicon Valley Innovation Ecosystem Creates Success
Silicon Valley boasts perhaps the most unique, difficult-to-replicate regional innovation ecosystem in the world. The presentation explores five key characteristics that make Silicon Valley so distinct: 1) its five world-class research universities, five U.S. national laboratories, and dozens of world-class corporate and private research institutions; 2) a half-century of intense federal R&D investment; 3) 40 percent of U.S. venture capital invested and seven of America’s top ten VC investors; 4) 6 of the world’s top 10 ICT companies located with a ten-square-mile radius; and 5) a concentration of both advanced-degree holders and foreign-born start-up founders more than twice the national average. The presentation also explains how companies in the Valley are different, particularly that they use a “need-seeker” strategy that strives to address unarticulated needs and seeks to be first-to-market with the resulting new products and services.
The Challenges for America’s Defense Innovation
From WWII to the 1957 launch of the Soviet Sputnik to the 1980s defense buildup, U.S. defense investments in research and development not only promoted American security and safety but made a major contribution to U.S. innovation and economic leadership, assisting in the development of a host of industry-defining technologies from the Internet to GPS to the laser. Yet since the end of Cold War, federal funding for R&D, including defense R&D, has increased much more gradually and recently has actually declined. In addition, the 2013 sequestration – which mandated automatic spending cuts numerous programs including defense research initiatives – has exacerbated the challenge.
This report takes a closer look at America’s defense innovation ecosystem, assessing the current state of U.S. military expenditures compared to historical averages and our international competitors. It then analyzes the impact of the sequestration and limited budgets, the decline of the industrial base for defense needs, and the erosion of domestic innovation generally on the health of the defense research enterprise. The United States defense system is still the most innovative in the world, but that leadership is not assured and is in danger of failing. This decline in leadership will not only impact defense innovation and capabilities, but also overall commercial innovation and U.S. competitiveness.