[Congressional Record Volume 143, Number 24 (Friday, February 28, 1997)]
[Senate]
[Page S1801]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             R&D TAX CREDIT

 Mr. CONRAD. Mr. President, I believe that the Congress must 
make permanent the research and development [R&D] tax credit. The R&D 
credit has proven to be critical to the United States' economic growth 
and international competitiveness. The credit has led to many successes 
in U.S. scientific research and innovation, such as extraordinary 
accomplishments in pure mathematics; unprecedented growth in the power 
and availability of information technology; and rapid progress in 
finding cures for life threatening diseases such as AIDS, cancer, and 
multiple sclerosis.
  For my State of North Dakota, the new information technologies mean 
that information industries are creating thousands of jobs. Despite 
these accomplishments, and the obvious long-term benefits, the R&D 
credit continuously faces challenges to its existence. Because the R&D 
credit has never been made permanent, it has had to be extended seven 
times by Congress since its inception. This transitory treatment of the 
R&D credit has forced R&D companies to be more hesitant in planning 
future research projects. Unfortunately Mr. President, this on-again 
off-again process also led to an unnecessary and disturbing 
circumstance in 1996. For the first time in the history of its 
consecutive extensions, last year the R&D credit was not extended 
retroactively, leaving a gap in the law from July 1, 1995 through July 
1, 1996. The gap has, and will continue to, adversely affect our 
country's R&D efforts. The gap has already contributed to decreased 
investment in R&D and less planning for future R&D projects by many 
companies. Currently, the R&D credit is due to expire on May 31, 1997.
  Mr. President, we must act now to permanently extend the R&D credit 
and send the right signal to our Nation's innovators. Failure to act 
will not only jeopardize our Nation's research efforts, but it will 
also threaten the United States's world leadership in R&D. Our Nation's 
growth in R&D investment over the past decade has already been slow 
compared to Japan, Germany, Italy, and France. Budget realities are 
forcing the United States to further curtail discretionary spending for 
basic research. In fact, United States non-defense R&D investment has 
been flat at 1.9 percent of GDP after peaking at 2.0 percent in 1985, 
while Japan's has continued to grow to 3.0 percent. Although Germany's 
R&D commitment has been fairly stable at 2.7 percent since 1987, it is 
significantly higher than in the United States. One of the main reasons 
the United States lags behind these countries in R&D investment is 
because these countries offer their innovators generous tax incentives 
for R&D, including both deductibility of current expenses and special 
tax credits. Future economic challenges to the United States are also 
likely to come from developing countries in Asia as they boost R&D 
investment to catch up to the rest of the world.
  New realities are being shaped by rapidly growing international R&D 
capabilities. These new R&D capabilities have created both global 
options as well as competitive pressures whose dimension are barely 
understood. Unless Congress decides to adapt to these realities and to 
enact a permanent R&D credit, the United State's leadership in the 
global arena may plummet. Such a result will not only adversely impact 
the United States internationally, but at home as well in lost jobs, 
diminished economic growth and a decreased standard of living.
  As we prepare for the 21st century, we must remain committed to 
providing an environment that fosters technological investment, 
scientific exploration, and global competitiveness. Future economic 
growth and the prosperity of all Americans depends on continued R&D. 
America' well being depends on it. Let's remove the uncertainty 
surrounding the R&D credit's extension once and for all, and extend the 
credit permanently.

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