Federal

Congress should increase funding for the Advanced Research Projects Agency for Energy to $1.5 billion.

The ARPA-E program is critical to securing American clean energy competitiveness by developing a new generation of affordable technologies that can form the basis of a new export-oriented clean energy growth strategy. But the funding level for this innovative program remains far too small to keep up with either our economic competitors or the scale of need. Congress should work to increase ARPA-E’s budget to $1.5 billion in five years, and $3 billion in ten years. Funding at this level would eventually bring ARPA-E to the same scale at which DARPA is funded today. Given the expected multi-trillion dollar scale of the clean energy industry, only funding levels of this order of magnitude will spur the pace of innovation and entrepreneurialism necessary in the clean energy industry.

Congress should increase the Alternative Simplified R&D credit in order to boost private sector R&D investments.

The U.S. R&D credit is far less generous than that of most other countries. In 2012, the United States ranked just 27th out of 42 countries studied in terms of R&D tax incentive generosity, down from 23rd just five years ago. Brazil, China, and India all offer more generous R&D tax credits than the United States. There are two potential policy options Congress could take increase America’s R&D competitiveness. Congress should either increase the ASC from 14 percent to 20 percent or it should expand the ASC by enacting a three-tier credit. Firms would continue to receive a credit of 14 percent of the amount of qualified expenses greater than 50 percent and below or equal to 75 percent of the average qualified research expenses. For qualified expenses greater than 75 percent and below or equal to 100 percent firms would receive a credit of 20 percent and for qualified research exceeding 100 percent of the base the credit would increase to 40 percent.

Congress should develop “Turbo-Tax”- like e-government applications, especially for business interactions with government.

Most states have business portals that allow entrepreneurs to find information about creating a business online, but too few of these sites actually navigate users through regulatory process of creating and maintaining a business online. These portals should be run more like tax preparation software created by companies that guide taxpayer through numerous options to maximize their savings. Based on location and other relevant information entered by an individual, the software tools would automatically generate all the forms for all the government agencies (including local, state and federal) that apply. “Wizard” software could guide individuals through processes by asking them questions and on the basis of answers help them fill out the required forms. These programs would allow people to automatically file forms to the appropriate government agencies. Such "turbo" tools could radically simplify the process of dealing with government, providing savings.

To boost investments in new equipment and to increase productivity, Congress should allow firms to expense, for tax purposes, all the cost of machinery and equipment in the first year instead of having to depreciate the costs over a number of years.

An effective growth policy needs to be based in part on lower prices for equipment and machinery. One way to do this is to let firms expense all the cost of equipment in the first year instead of having to amortize the costs over a number of years. Allowing for the expensing of purchases of plant and equipment will reduce the after-tax price of investment, raising the level of domestic investment and the productivity of workers. While expensing allows a tax-paying entity to deduct the full cost of assets in the year of purchase, depreciation spreads these deductions over a federally-determined asset lifetime. This costs firms more because they have less capital in early years. Expensing will not only make the U.S. corporate tax code more globally competitive, it will spur higher productivity and wages.

Congress should strengthen the U.S. Trade Representative’s power to address foreign trade barriers in order to more effectively enforce existing trade rules.

One reason why USTR has not done more to enforce existing trade agreements is because doing so is quite costly and labor intensive. But much of USTR’s budget goes toward negotiating new trade agreements, as opposed to vigorous enforcement effort of existing agreements. Congress should increase USTR’s budget with the new resources devoted to enforcement and the fight against unfair foreign trade practices.

To promote collaboration between firms and non-corporate entities, Congress needs to broaden the R&D credit for collaborative energy-related research to any area of collaborative research and expand the rate from 20 to 40 percent.

There are several reasons to treat collaborative research more generously. First, participation in research consortia has a positive impact on firms’ own R&D expenditures and research productivity. Second, most collaborative research is more basic and exploratory than research typically conducted by a single company. Moreover, the research results are often shared, often through scientific publications. As a result, firms are less able to capture the benefits of collaborative re search, leading them to under invest in such research relative to socially optimal levels. Other countries, including Canada, Denmark, Hungary, Japan, France, Norway, Spain and the United Kingdom, provide firms more generous tax incentives for collaborative R&D. The U.S. provides a 20 percent total credit for collaborative R&D but it only applies to energy research.

The Federal government should not provide funding to institutions of higher education unless they publically report National Survey of Student Engagement scores.

Each year, the National Survey of Student Engagement asks freshmen and seniors at participating schools to answer questions about their educational experiences – their classroom participation, interaction with faculty, and time spent on various enriching activities, for example. The survey helps universities know where they rank compared to other schools and where improvements are most needed. The survey could also provide valuable information to prospective students and parents. Yet currently most schools refuse to make public their scores because they are worried unfavorable scores will deter students from enrolling.

The Department of Education should launch an annual survey of employers that polls what skills are most desirable in different industries.

One of the reasons for the growing disconnect between what college students are learning in the classroom and what they actually need to know to be successful in the workforce is the lack of a national-level survey asking what employers actually value in a recent graduate. While the relevant skills in some careers such as engineering and mathematics are closely aligned to traditional academic coursework, others, such as management, investment banking, or sales are not. A national survey of employers would help schools develop more appropriate curricula and students decide what classes and skills are most valuable for their careers.

Congress should avoid penalizing workers whose income fluctuates because they lose their jobs by reinstating income averaging in the federal tax code.

Before the 1986 Tax Reform Act taxpayers could average their income over three years, enabling them to avoid lower taxes in years when their incomes were temporarily low. The current federal tax code lacks this provision, penalizing workers who lose their jobs. Taxpayers should be allowed to average their income over three years and be able to take a tax credit for prior taxes paid if their tax liabilities fall because their incomes drop.

Congress should allow foreign students receiving STEM graduate degrees from U.S. universities to automatically qualify for green cards.

Scientists and engineers are key drivers of innovation. Yet the number of Americans obtaining graduate science and engineering degrees has not kept up with demand. Indeed, almost one half of Ph.D. graduates of U.S. engineering, computer science, physical science, and life science programs are now from other nations. If we want the United States to continue to be the global innovation leader, we should make it easier for the talented individuals who receive a graduate degree in science, technology, engineering, a