Taxes

ITIF Policy Forum: E-Government and Electronic Tax Filing, Comparative Strategies of the United Kingdom and United States

June 5, 2007 - 12:00pm - 2:00pm
The Information Technology and Innovation Foundation
Washington
DC

E-government has the potential to streamline government, cut costs, and improve citizen access.

Expanding the Research and Development Tax Credit to Drive Innovation, Competitiveness and Prosperity

April 2, 2007
| Reports

The U.S. economy faces a new and formidable competitiveness challenge. Not only has the emergence of a global economy led to the creation of robust new economic competitors, but within the last decade many nations, including most of Southeast Asia and Europe, have made innovation-led economic development a centerpiece of their national economic strategies. Their aggressive use of research and development (R&D) tax incentives is just one indicator of that commitment. Unfortunately, the United States has not kept pace. While we provided the most generous tax treatment of R&D in the late 1980s among OECD nations, by 2004 we had fallen to 17th

Addressing this new competitiveness challenge will require policy makers to take a host of steps, including improving education and significantly increasing funding for research. Yet while these steps are necessary, they are not sufficient to win the competitiveness challenge. Policy needs to do more than boost the supply of innovation resources (e.g., a better trained workforce and increased basic research discoveries); it must also spur demand by companies to locate more of their innovation-based production in the United States. If the United States is to remain the world’s preeminent location for technological innovation (and the high paying jobs that result), Congress will need to significantly expand the Research and Experimentation Tax Credit. To do that Congress should:

 

  • Make the R&D tax credit permanent
  • Double the rate of the regular credit from 20 percent to 40 percent
  • Expand the Alternative Simplified Credit
  • Create a flat credit for Collaborative R&D
  • Allow firms to expense in the first year expenditures on research equipment
  • Exempt the credit from the corporate Alternative Minimum Tax

New Report Finds U.S. Tax Incentives For Research And Development Now 17th Most Generous Among OECD Nations

WASHINGTON, D.C. – The Information Technology and Innovation Foundation (ITIF) today released a report examining the effectiveness of the United States Research and Experimentation (R&D) tax credit. Read more »

The Research and Experimentation Tax Credit: A Critical Policy Tool for Boosting Research and Enhancing U.S. Economic Competitiveness

September 5, 2006
| Reports

The emergence of a “flat world” has meant that the U.S. economy faces new robust economic competitors, many that combine low costs and high tech. Indeed, as a growing number of nations have come to understand the link between technological innovation and increased prosperity, many not only encourage domestic firms to invest more in research, but also aggressively seek R&D investments by foreign, often American, technology companies. And key weapons in their economic arsenals are tax incentives for research.

As a result the United States faces a significantly different world than even 20 years ago. After President Reagan signed legislation creating the R&D tax credit in 1981 the United States had the distinction of providing the most generous tax treatment of R&D of all OECD nations. But because the generosity of the credit has been whittled away over the years, and other nations have forged ahead, by 2004 we had dropped to 17th most generous.

The Research and Experimentation Tax Credit (referred to here as the R&D tax credit) can play an important role in ensuring that the United States remains an attractive location for global companies to conduct research. Not only does the credit spur the retention and attraction of investment in R&D in the United States, new scholarly research shows convincingly that the credit is an effective tool for stimulating additional research which in turn leads to faster economic growth. As a result, legislation now before Congress to extend and expand (by adding the Alternative Simplified Credit) the credit is crucial to ensuring that the U.S. innovation economy continues to prosper and grow.

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