To encourage innovation, Congress should pass two bills protecting important R&D tax provision
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Politicians on both sides of the aisle have expressed a desire to bring the country together and work on a bipartisan basis to help the economy recover as we emerge from the COVID-19 pandemic.

If they are serious about this goal, they must act to protect an important tax provision that encourages American innovation, manufacturing, and competitiveness.

Currently, businesses can immediately deduct the costs of new investments, including costs associated with research and development (R&D). But starting at the end of the year, businesses will effectively face a tax increase on R&D by being forced to amortize (or deduct) R&D costs over a 5-year or 15-year period.

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Unless lawmakers act, businesses across the country will see a significant tax increase on this investment. According to the Tax Foundation, forcing businesses to amortize new R&D costs would be a tax hike of $100 to $120 billion over the next decade.

If allowed to go into effect, this tax hike will reduce new investments that help create jobs, raise wages, and make America globally competitive and innovative.

The American Innovation and Jobs Act and the American Innovation and R&D Competitiveness Act was developed by Sens. Maggie HassanMargaret (Maggie) HassanPoll: Potential Sununu-Hassan matchup in N.H. a dead heat  Bipartisan group says it's still on track after setback on Senate floor Democrat calls on Olympics to rectify situation after Paralympian drops out of games MORE (D-N.H.) and Todd YoungTodd Christopher YoungBipartisan group says it's still on track after setback on Senate floor Paying attention to critical infrastructure can combat sophisticated cyberattacks Schumer, Tim Scott lead as Senate fundraising pace heats up MORE (R-Ind.) and Reps. John Larson John Barry LarsonThe case for improving America's research and experimentation tax credit To encourage innovation, Congress should pass two bills protecting important R&D tax provision Democrats have a growing tax problem with SALT MORE (D-Conn.) and Ron EstesRonald (Ron) Gene EstesThe case for improving America's research and experimentation tax credit To encourage innovation, Congress should pass two bills protecting important R&D tax provision Lobbying world MORE (R-Kan.) to stop this tax increase. We are grateful to these lawmakers for introducing commonsense and bipartisan legislation, something that is all too rare in Washington these days.

There is strong support for this important legislation from Democrats and Republicans across the country including Reps. Jimmy PanettaJames Varni PanettaOvernight Defense: US nearing halfway point of Afghanistan withdrawal | Army soldiers mistakenly raid olive oil factory House Democrats introduce bill to protect transgender military dependents The case for improving America's research and experimentation tax credit MORE (D-Calif.), Suzan DelBeneSuzan Kay DelBeneBiden administration stokes frustration over Canada Reducing compliance burdens for the beauty industry Tech industry pushes for delay in antitrust legislation MORE (D-Wash.), Darin LaHoodDarin McKay LaHoodThe case for improving America's research and experimentation tax credit To encourage innovation, Congress should pass two bills protecting important R&D tax provision GOP leader to try to force Swalwell off panel MORE (R-Ill.), and Jodey ArringtonJodey Cook ArringtonThe case for improving America's research and experimentation tax credit Republicans attack Biden agenda after disappointing jobs report To encourage innovation, Congress should pass two bills protecting important R&D tax provision MORE (R-Texas), and Sens. Catherine Cortez MastoCatherine Marie Cortez MastoOvernight Energy: Senate panel advances controversial public lands nominee | Nevada Democrat introduces bill requiring feds to develop fire management plan | NJ requiring public water systems to replace lead pipes in 10 years Nevada Democrat introduces bill requiring feds to develop fire management plan Six takeaways: What the FEC reports tell us about the midterm elections MORE (D-Nev.), Rob PortmanRobert (Rob) Jones PortmanKey Biden ally OK with dropping transit from infrastructure package Frustration builds as infrastructure talks drag Hillicon Valley: Democrats introduce bill to hold platforms accountable for misinformation during health crises | Website outages hit Olympics, Amazon and major banks MORE (R-Ohio), and Ben SasseBen SasseSasse calls China's Xi a 'coward' after Apple Daily arrest Defunct newspaper's senior editor arrested in Hong Kong Murkowski: Trump has 'threatened to do a lot' to those who stand up to him MORE (R-Neb.).

The bill would stop the loss of quality, high paying jobs. In 2017, the average wage for R&D related jobs was $134,978 — 2.4 times higher than the average wage, according to the Bureau of Labor Statistics.

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But this economic damage is only the beginning. It would also harm suppliers and reduce consumption. When this is taken into account, this tax hike would actually eliminate almost 68,000 jobs per year in the first five years and 170,000 annual jobs thereafter.

Allowing businesses to immediately deduct the cost of all new investments, including R&D, is the right tax policy.

For example, the $288 billion equipment manufacturing industry owes much of its success and global competitiveness to R&D. Equipment manufacturers spend their days analyzing how to improve existing product offerings and solve market problems.

The tax code allows them to use those credits to invest into R&D and keep their pricing competitive vis-à-vis foreign competitors. But perhaps most importantly, it allows equipment manufacturers to spend time on projects where the return on investment is untested or unclear. These projects are often the ones that makes the biggest impact.

This tax treatment is not a giveaway to equipment manufacturers or other businesses. The tax code rightly allows immediate expensing for all types of assets — a provision that simplifies the tax code by incentivizing all investments and putting them on a level playing field with other business expenses such as wages, rent, and health care costs.

The United States already lags many foreign competitors in promoting R&D. According to a Manufacturing Leadership Council study, the U.S. ranks 26th in R&D tax incentives when ranking the 36 developed countries in the Organisation for Economic Co-operation and Development (OECD).

While this low ranking is alarming, it is based on current U.S. policies, not what will happen if R&D amortization goes into effect. This ranking will almost certainly decline if R&D expensing is allowed to expire at the end of 2021.

For the country and the economy to recover from the pandemic, we need policies that strengthen innovation and competitiveness for manufacturers and businesses across the country. As part of this goal, lawmakers should pass the two bipartisan bills to stop the looming tax hike on R&D and ensure U.S. businesses can compete and thrive in the global economy.

Kip Eideberg is senior vice president of government and industry relations at the Association of Equipment Manufacturers. Alex Hendrie is director of tax policy at the nonprofit group Americans for Tax Reform.