[Congressional Record Volume 155, Number 1 (Tuesday, January 6, 2009)]
[Senate]
[Page S54]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. McCAIN:
  S. 37. A bill to amend the Internal Revenue Code of 1986 to 
permanently extend the research credit; to the Committee on Finance.
  Mr. McCAIN. Mr. President, today I introduce the Economic Growth 
Through Innovation Act of 2009. This bill would make permanent the 
current research and development tax credit. Otherwise, this tax credit 
will expire on December 31, 2009.
  A permanent credit would provide an incentive to innovate, and remove 
uncertainty now hanging over businesses as they make research and 
development investment decisions for 2010 and beyond. The research and 
development tax credit was first established in 1981 and has been 
extended and revised repeatedly since then. Failure to make the tax 
credit permanent has led to reduced investment in research, which has 
led to fewer jobs being created in the United States. Tax policies have 
a powerful influence on business investment and hiring decisions, and 
that is why I have chosen to introduce this bill on the first day of 
the 111th Congress. Additionally, both President-elect Obama and I were 
in full agreement during the campaign that making permanent the 
research and development tax credit is critical to spurring investment 
in developing technologies.
  In the 1980s, the U.S. was a leader among nations for providing the 
most generous tax treatment of research and development. By 2004, the 
most recent study, the United States had fallen to 17th, which explains 
why the U.S. is no longer considered by many to be the world leader in 
innovation and technology. A permanent, meaningful research and 
development tax credit will ensure that businesses keep funding 
research and development, which may lead to numerous new discoveries in 
the U.S. such as fuel-efficient vehicles, cancer treatment or the 
development of clean energy.
  Studies have shown that on average, companies invest $94 in research 
and development for every $6 the Federal Government invests in the tax 
credit. While I understand that some economists have estimated this tax 
credit may cost many billions of dollars in tax revenue to the Federal 
government, I believe it is essential to spurring an economic recovery.
  Companies of all sizes, in a wide range of industries, have taken 
advantage of the research and development tax credit during its 
existence. According to a recent study by Ernst & Young, 17,700 
businesses claimed $6.6 billion research and development tax credits on 
their tax returns in 2005, the most recent year available. Almost a 
quarter of these businesses were small businesses with $1 million of 
assets or less, and almost half were businesses with assets of $1-$5 
million, which is the lifeblood of the U.S. economy. Firms in the 
manufacturing, information and services sectors claimed the majority of 
the credit, and the states with the highest number of companies 
reporting research and development activity include those States that 
have been hit the hardest by the depressed economy such as Michigan, 
Pennsylvania and California.
  Congress has endorsed the credit by extending it 13 times since 
enactment, and several times the credit has been reinstated 
retroactively. Yet, it has never been made permanent, creating a less 
certain investment atmosphere. With so many Republicans and Democrats 
in agreement that this tax credit must be made permanent, including 
President-elect Obama, I hope this bill will be given swift 
consideration and signed into law during the first few months of 2009 
to increase our nation's ability to innovate, create jobs and improve 
our sagging economy.
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