Where There’s Research, There’s Growth : Business: Reinstate the tax credit for R&D; investment.

President Clinton and the Republican Congress have an opportunity to prove their commitment to economic growth by extending the federal tax credit that expired last June for businesses’ research and development.

A 15 year-old legislative initiative with a remarkable record of spurring innovation and success, the R&D; tax credit is regarded as the single most effective tool government has to help business. This is especially true in the high-tech and emerging growth industries that are currently driving the economy. Economists have linked the tax credit to steady economic growth and productivity. Industry leaders have credited it with spawning private investments that are worth far more than the federal investment. Its effectiveness and its critical role in helping establish our global leadership in new and emerging technologies are just a few of the reasons that political leaders from both parties have jumped on the R&D; bandwagon.

Clinton’s vocal support for R&D; tax credits helped him win the strong support of the high-tech community during the 1992 campaign. Congress, too, has been supportive, voting to extend or modify the credit 10 times since 1981.

Yet despite this widespread support, the tax credit was allowed to expire.

Numerous economic studies in the major industrial countries have concluded that government research and development spending directly contributes to faster economic growth.

Studies have shown that company-funded industrial research and development investments that include a tax-based incentive increase productivity by an average of about 35% while government spending (direct government subsidy) yields less than a 5% increase.

Anyone who has watched the growth of America’s high-tech sector has seen firsthand how research and development investment leads to new jobs, new businesses, even entire new industries. And anyone who has benefited from breakthrough products--new treatments for genetic disorders, innovative computer applications, improvements in agricultural production, new tools to clean up the environment--has felt the effects of this important tax credit.

But despite political support and the powerful evidence in its favor, America has been without an R&D; tax credit for nine months. The high-tech community is waiting to see who will lead the effort to put this critical part of the tax code back where it belongs.