R&D credit welcomed by tech sector, but rift with Obama remains

After a term spent alienating many in the technology sector with what they view as burdensome policies, President Obama’s proposal to renew a research and development tax credit could act as balm — but only a limited one, industry leaders said Wednesday.  

“When Christmas comes, you’re happy, and sometimes Christmas comes late,” Rey Ramsey, the president of the trade group TechNet, said in an interview. “None of us really know why it took so long.”

In a new economic push, the White House has proposed to make permanent, expand and simplify a lapsed R&D tax credit that tech companies have long lobbied for. The benefit will “go to companies for all the research and development they do right here in America,” President Obama said in an address on Wednesday.

Technology companies are welcoming the measure after recoiling at policy after policy from Washington this year. Tech firms have lamented delays on crucial free trade agreements and argued that burdensome corporate tax rates make American companies want to move their factories elsewhere. The sector has also been disappointed by high-tech immigration proposals,
which leaders say could make it harder for companies to bring the best
talent to their labs.

“We see a host of laws, regulations and other policies being enacted that impose a government prescription of how individual industries ought to be structured, rather than produce an environment in which the private sector can innovate, invest and create jobs in this modern global economy,” Business Roundtable Chairman and Verizon Chief Executive Ivan Seidenberg said in a speech in June.

“By reaching into virtually every sector of economic life, government is injecting uncertainty into the marketplace and making it harder to raise capital and create new businesses,” he said. 

The sentiments are widespread in the high-tech world. Intel’s chief executive, Paul Otellini, criticized Washington Democrats in a similar address last month. “I think they’re flummoxed that their experiment in Keynesian economics is not working,” he said.

The R&D credit could help, but don’t hold expect Otellini and Seidenberg to sport “Yes we can” pins anytime soon.

“This isn’t going to solve all the feelings and thoughts a lot of people have, but it’s a good policy and, when it’s a good policy, we like to step forward and say, ‘Let’s look at it on its merits,’ ” Ramsey said. “Everyone, in the midst of solving those problems, throws apples and oranges.”

The word from tech chiefs in his association, Ramsey said, is “cautious optimism.”

“Nobody knows the details [of the R&D credit]; that’s where the caution comes in,” he said. “The objective test needs to be: Whatever we do, is America fundamentally competitive?”

Information Technology Industry Council (ITI) President Dean Garfield struck a similar tone, commending President Obama on Wednesday for the proposal. He estimated that the credit will create 160,000 jobs and generate $17 billion in additional tax revenue.

Failing to act on the proposal would hurt “workers and employers,” he said, adding that the policy should garner bipartisan support.

Technology companies would “love to see” the R&D credit get public support from the GOP, Ramsey echoed. House Minority Leader John Boehner (R-Ohio) panned the White House’s new economic proposal as expensive and possibly fruitless.

But paying for the credit and giving businesses a break are not mutually exclusive, according to Ramsey.

“The looming issue is pay-fors,” Ramsey said. “It’s legitimate for anyone to say, ‘What’s the fine print? How will we pay and extend the benefit?’ I think we can do both.”

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