The United States is an innovative country – it’s something in our DNA. Americans have invented everything from the air conditioner to the zipper. Schoolchildren learn about Eli Whitney’s cotton gin and Alexander Graham Bell’s telephone. Our country has been flooded with pioneers who have revolutionized industries – and even generated new ones.
The talented men and women sought the extraordinary and didn’t give up as they pursued new innovations.
As Thomas Edison said when asked about achieving no results while developing a nickel-iron battery, “Results! Why, man, I have gotten a lot of results! I know several thousand things that won’t work.”
The results from Edison, Bell, Whitney and others are the foundation of today’s research and development that fuels our ingenuity.
But that innovative spark in the U.S. is at risk of diminishing.
Despite the partisan bickering that makes for great cable news ratings, many expiring or expired provisions of the Tax Cuts and Jobs Act actually have broad bipartisan support, including immediate expensing of research and development.
While this provision might not get the attention that the double Child Tax Credit or increased standard deduction receive, it has deep implications for manufacturers and workers across the country, but we need to act now to make sure this critical provision is renewed and made permanent.
The 2017 tax law allowed businesses and innovators to fully expense their R&D costs immediately in the year they occur. It was a common-sense measure that encouraged homegrown innovation. However, the provision expired at the end of 2021, forcing businesses to amortize their domestic R&D expenses over five years and 15 years for foreign R&D.
What’s worse, other countries like China, which has a 200% super deduction on R&D, have pursued aggressive approaches to capture research and development within their borders.
Why? Because where R&D occurs, jobs and manufacturing follow.
Unfortunately, we’ve abdicated our dominance in R&D since 2022, and now we’ve witnessed a R&D slump in the United States while other countries have seen an increase. And because three-quarters of research and development spending is on wages and salaries, the decline in R&D has negatively impacted our nation’s job growth.
The fix is simple – restore immediate R&D expensing and make the provision permanent.
Not only is it simple, but most members of Congress agree with the approach. In the last Congress, my bipartisan American Innovation and R&D Competitiveness Act reached 223 cosponsors, nearly split between Republicans and Democrats. It was one of the most bipartisan, most cosponsored pieces of legislation in the entire Congress.
Now, as my Ways and Means colleagues are drafting the extensions to the Tax Cuts and Jobs Act, we must act to restore this provision and provide stability through permanency.
If we want to reinvigorate the spark from Bell, Whitney, Edison, and countless others, we need to foster an environment that encourages more innovation. Immediate expensing of R&D does just that, and it’s widely applauded by industry organizations, legislators, and businesses. We have the solution, so there’s no need to reinvent the wheel.
Rep. Ron Estes, one of only a handful of engineers in Congress, worked to improve systems and operations in the aerospace, energy and manufacturing sectors before representing Kansas’ 4th Congressional District beginning in 2017. He is a fifth-generation Kansan, former state treasurer, and serves on the House Committee on Ways and Means, Budget Committee and Joint Economic Committee. He is the chair of the Social Security Subcommittee and co-chair of the House Aerospace Caucus.