R&D tax credits for manufacturers made permanent

15.05.2014

There aren't many things that are permanent in this world - typically just death and taxes. Now there's something else - R&D tax credits for manufacturers. Ever since Congress implemented the R&D tax credit for manufacturers to promote research and development, innovation and jobs, it's been temporary. Every year Congress must vote on whether or not to extend this credit. Every year, about this time, they vote and in some cases have had to make it retroactive to the previous year if the vote was not taken in the previous year due to gridlock and other congressional wrangling.

On May 9th, the House voted to make permanent the R&D tax credit, which expired at the beginning of the year. The bill passed by a vote of 274 to 131, with 62 Democrats joining nearly every Republican in support of this tax credit. Not everyone was happy about its passage, as it will add $156 billion to the budget deficit over the next decade, according to one report.

I'm not sure how they figure that. Sure, companies that take advantage of the tax credit will pay less in taxes but it also means that the new products they create and manufacture will help the business grow which means the companies will have to hire more people who will make good wages and those people will pay taxes. The old "trickle down" theory, you know. Ultimately the benefits of such a tax credit will outweigh the costs. But rarely does Congress do a "cost-benefit" analysis on anything that comes up for a vote.
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