Tech think tank urges Congress to expand research tax credit

Tech think tank urges Congress to expand research tax credit
© Getty Images

The Information Technology and Innovation Foundation (ITIF) is urging Congress to expand the research and development tax credit as lawmakers work on legislation to overhaul the tax code.

“Unlike most special tax provisions, there is a clear and strong economic rationale for the R&D tax credit,” ITIF, a think tank focused on science and technology policy, said in a report Wednesday.

Congressional Republicans and the Trump administration have said they want to enact tax reform legislation this year. House Republicans released a tax plan last year that would keep the research and development tax credit, and a proposal that President Trump released during his campaign would also preserve the preference. However, the tax plan that the White House released in April does not explicitly mention the credit, and policymakers will need to find ways to pay for at least some of the tax cuts they want to enact.

ITIF said that the R&D tax credit is an important tax provision because it increases “economic welfare by responding to clear market failures.”

The think tank said that academic studies have found that the R&D tax credit has led companies to conduct more research and that incentives for research and development also influence where businesses do their research. ITIF also said that the U.S. lags behind other countries when it comes to the generosity of its incentives for research.

ITIF recommended that Congress lower the corporate tax rate and expand the R&D credit by increasing the value of the simplified version of the credit from 14 percent to 20 percent.

“Expanding the R&D tax credit is completely compatible with simplifying the tax code and lowering the corporate tax rate, and would help accomplish the most important goal of tax reform, which is to spur innovation and growth,” ITIF senior fellow Joe Kennedy, the lead author of the report, said in a news release. “If the U.S. is to lead the world in R&D in the coming decades, then Congress has to lead by expanding this tax credit in the coming months.”