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American innovation is losing ground — here’s how we can once again lead the charge

Cornell University

As Democrats focus on pronouns and vilifying police, America is losing ground to China and other countries in global competitiveness. 

It’s time for the Biden administration to work with Republicans to promote innovation and advance policies to help our businesses compete on the international stage.

One critical step is to promote incentives for research and development (R&D).

The U.S. established the R&D tax credit in 1981 and for the next two decades remained at the top of the global leader board in terms of R&D incentives. According to a study by DST Advisory Group, the U.S. ranks 24th compared to other developed countries. China is particularly aggressive. Its R&D tax subsidy is now nearly three times more generous than ours.

R&D propels innovation and innovation drives the creation of good paying jobs. The average salary for workers in the R&D field is substantially higher than other vocations. For example, in the biotechnology industry, a field heavily dependent on R&D incentives, wages are nearly two times the national average.

World leadership in R&D is also critical to a strong national defense, a superior education system, world-class health care and a favorable balance of international trade — key components for peak economic performance.

But the U.S. has lost its footing at a time when we cannot let others gain ground.

What’s the solution? Let’s start with an easy step.

Until last year, thanks to the Republican’s Tax Cuts and Jobs Act, U.S. tax law allowed companies to fully write off (expense) qualified R&D costs in the year incurred. This represented a key incentive to locate R&D in the U.S. But beginning in 2022, tax law will require that companies deduct their U.S. R&D costs across five years.

This is a disincentive to R&D investment. Economically it’s like giving our international competitors a head start. My colleague on the House Ways and Means Committee, Ron Estes from Kansas, has introduced legislation which would allow companies to continue to write off their R&D expenses. Congress should enact this commonsense reform immediately.

But we shouldn’t be complacent with the U.S.’s current tax credit, which lags the competition. Currently the U.S. provides a credit of up to 20 percent of incremental R&D costs. Doubling the R&D credit would provide a huge boost off the starting block. Another Ways and Mean member, Jackie Walorski from Indiana, recently introduced a bill that would do just that. Enactment of this bill would represent a major step toward America catching up to the competition.

Promoting startup companies is another way to compete in the innovation race. Helping entrepreneurs take their unique product or service idea from concept to reality is what the American dream is all about. That’s why I introduced the American Innovation Act, which would quadruple the amount of start-up costs small business owners can deduct from their federal income taxes, raising the limit from $5,000 to $20,000.

Finally, let’s incentivize companies to move the results of R&D — intellectual property — back to the United States. Universities, manufacturers, other American businesses, life sciences companies and hospitals could all benefit by having researchers in closer physical proximity. Here, too, my colleague on the Ways and Means Committee, Darin LaHood from Illinois, introduced legislation to make it easier to bring intellectual property and associated R&D activities back to the U.S. This would greatly strengthen the innovation ecosystem and help the U.S. win back its leadership role.  

Yes, the race is on. For at least the last decade, other countries have stepped up their investments in innovation and either caught up or surpassed us. Republicans are offering a second wind that will get America back to leading the race. Republicans are fighting to foster American innovation by allowing American companies to benefit when they invest, improving the generosity of the R&D credit, returning R&D to the United States and making America the most innovation-friendly economy in the world.

Vern Buchanan represents Florida’s 16th District in the House of Representatives and is the co-chairman of the bipartisan Florida delegation. Buchanan is second in seniority on the Ways and Means Committee, where he serves as the lead Republican of the Health Subcommittee.

Tags Research and development investment Tax credit Vern Buchanan

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