Republicans Wrongly Exclude Permanent Extension of Research and Development Tax Credit, Say New Democrats

WASHINGTON, DC-- Today, members of the New Democrat Coalition (NDC), a group of 63 centrist, tech-savvy Democrats, criticized House and Senate Republicans for excluding a permanent extension of the research and development (R&D) tax credit from the conference report of their $792 tax cut package. The plan approved by members of a House-Senate conference committee yesterday extends the R&D tax credit for only five years.

Permanent extension of the R&D tax credit is a top priority for the NDC. Two weeks ago, NDC members supported an alternative $250 billion tax relief package authored by Rep. Charles Rangel (NY) that included a permanent extension of the R&D tax credit. “New Democrats are committed to ensuring that our tax code encourages effective investments in innovative research and technology,” said NDC Co-Chair Cal Dooley (CA). “It is remarkable that even though the Republican tax package was more than three times the size of our package, Republicans were not able to find room for a permanent extension of the R&D credit.”

Permanent extension of the credit is included in the New Democrats’ recently-unveiled “e-genda,” an outline of the group’s policy objectives to meet the needs of the New Economy.

“The R&D tax credit is a proven and effective incentive to help stimulate economic growth through research and development of new technologies,” NDC Co-chair Rep. Jim Moran (VA) stated. “Permanently extending this tax credit would reduce the uncertainty that currently adds risk to already risky R&D investments.”

According to NDC Members, making the R&D tax credit permanent would greatly increase the tax credit’s impact.

“The R&D tax credit is a proven incentive for companies to expand much needed research and development. We need to make sure businesses can count on it every year,” said NDC member Rep. David Price (NC). “Research is a major driving force of the new economy, and the Republicans have failed to make the credit permanent to enable businesses that invest heavily in the long-term research to plan for the future.”

New Democrats also expressed disbelief that the Republicans could create such a large tax cut package without including what should be a cornerstone of policy for the New Economy.

“It’s extremely disappointing that in an $800 billion tax cut package, the Republican leadership failed to include a permanent extension of the research and experimentation tax credit,” said NDC member Rep. Adam Smith (WA). “Permanent extension of the R&D tax credit would help ensure that our economy keeps growing and that the United States remains the world leader in technology.”

A recent report by Coopers and Lybrand found that payroll increases from gains in productivity as a result of the R&D credit would total $64.1 billion through 2010. As a result of a permanent credit, Gross State Product – the basic measure of economic activity in a state – would rise overall by nearly $58 billion by 2010.

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