President Proposes Tax Credit to Create Jobs

With unemployment hovering at around 9.5%, it’s important that our government implements policies that lead to more job creation, preferably policies that lead to not only low-paying service area jobs, but higher paying jobs as well.  One idea for just such a targeted job creation strategy, that President Barack Obama included in his Fiscal Year 2012 Budget proposal, is to expand and simplify the Research and Experimentation (R&E) tax credit

This tax credit has been extended on a temporary basis 14 times since its creation in 1981, often retroactively.  This leaves businesses with uncertainty about whether the R&E tax credit will be available in the future, making it difficult to factor it into decisions to invest in long-term research projects that will not be completed prior to the credit’s expiration.  Making the R&E tax credit permanent will strengthen its incentive effect by providing certainty to businesses that the credit will be available for future research investments.

In addition to making the R&E tax credit permanent, the President proposed last September to increase the total amount of the R&E tax credit by 20 percent and simplify it, making it easier and more attractive for businesses to claim it for their research investments.  This proposal was subsequently included in the President’s FY 2012 Budget.

A new Treasury report shows that the President’s proposal to expand the R&E tax credit and make it permanent will leverage more than $100 billion in domestic private-sector research over the next 10 years.  It will also supportnearly 1 million research workers in the U.S.in professions that pay higher-than-average wages.  The vast majority of research costs supported by the R&E credit are labor costs and much of the research that takes place in the United States is done by highly skilled employees in science and technology professions that pay more than 75 percent more than the average annual wage for all professions.