WASHINGTON - The United States is continuing to fall behind other countries in providing tax incentives for companies to undertake research and development, putting U.S. firms at a disadvantage in the global innovation race, according to a report released today by the Information Technology and Innovation Foundation.
In We're #27: The United States Lags Far Behind in R&D Tax Incentive Generosity, ITIF analyzes tax policies in 42 nations to present a compelling picture of how other countries are stepping up the use of R&D tax incentives to spur innovation and investment while the United States has grown complacent. The report finds United States ranks 27th out of 42 countries on R&D tax incentives, down from 23rd just five years ago.
"In the face of stagnant growth, it is simply amazing that we are dragging our feet on upgrading one of the most effective tools we have for economic growth," said ITIF President Rob Atkinson. "Countries seeking to be at the cutting edge of innovation-based competitiveness are learning what we seem to have forgotten."
The U.S. pioneered the use of the R&D credit in 1981. The credit expired at the end of 2011 and Congress is considering options for renewing and expanding it. In a 2010 report, ITIF concluded that increasing the rate of the Alternative Simplified Credit (ASC) from 14 to 20 percent would increase annual GDP growth by $66 billion and create at least 162,000 jobs.
The report released today takes up a rating model known as the B-index, once used by the OECD. In 2011, the OECD switched to measuring the revenue costs of tax incentives as a share of GDP, seeking to bet