WASHINGTON — Hoping to end almost two decades of uncertainty, a bipartisan group of lawmakers that includes Rep. David Price plans to push Congress to make the temporary R&D tax credit a permanent law.
The government has continued the tax credit, which provides a 20 percent tax credit on any new spending that firms use toward research and development, as a temporary measure since 1981, renewing it nine times over that period. The current legislation is set to expire in June. Price, along with lead sponsors Reps. Robert Matsui, D-Calif., and Nancy Johnson, R-Conn., plans to introduce the proposal for a permanent law when the House reconvenes on Tuesday.
The credit does not apply to money spent on existing programs.
“We are in a ridiculous cycle where the tax credit expires every year and remains in limbo until the Congress gets around to renewing it,” said Price, a Democrat from Chapel Hill.
Price cited as support for the measure a finding by consulting firm Coopers & Lybrand that U.S. companies would spend $41 billion more on research and development over the next 12 years if they knew the tax credit was permanent. If the study is correct, a 20 percent tax credit would cut $800 million in federal revenue.
Some members of the House Ways and Means Committee, which deals with tax laws, don’t want that kind of figure appearing in a budget report, Price said. Instead, lawmakers who fear a public backlash against pumping money into corporations historically have chosen to keep the credit temporary, renewing it at annual intervals to make the revenue loss seem smaller — and lighter on deficits.
“That’s a mistake in reasoning,” he said. “It’s always a painful process of putting a package together that doesn’t make the deficit bigger, but this measure is worth it. In the long run, it will make money for this country and for our district.”
Although companies and some lawmakers said the incentive was crucial to supporting American businesses, Robert McIntyre, director of the Washington-based taxpayer advocacy group Citizens for Tax Justice, disagreed. The R&D tax credit amounts to “nothing more than a public relations” move by politicians who hail from research-concentrated areas and hope to appease the “powerful business lobby,” McIntyre said.
“It’s like apple pie and motherhood,” said McIntyre. “Who would say they’re opposed to research?”
McIntyre dismisses the credit as a windfall for wealthy multinational companies and said he sees no evidence that it benefits the American public.
But Price, who admitted it would be difficult to pinpoint negative effects if the tax credit was eliminated, called McIntyre’s opposition “a minority view.”
“A permanent extension will help companies plan for the future, encourage increased R&D and create more R&D facilities,” said Jim Roberson, president of the Research Triangle Foundation of North Carolina. “There’s no question that this is important to businesses in Research Triangle Park and across the Triangle.”
For Glaxo-Wellcome, a permanent tax credit for research and development could lead the Triangle-based pharmaceutical company to make plans for opening new domestic facilities far in advance, rather than locating itself in countries whose governments make doing business more attractive, said company spokesperson Ramona DuBose.
“When you’re a global company, and you can do research anywhere in the world, a tax credit gives the U.S. a little advantage over other countries.”
Herald-Sun, The (Durham, NC)
Date: January 28, 1999 Page: A8 Copyright, 1999, The Durham Herald Company
Beth McNichol 