[Congressional Record Volume 170, Number 6 (Thursday, January 11, 2024)]
[House]
[Pages H99-H102]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
RESEARCH AND DEVELOPMENT EXPENSING
The SPEAKER pro tempore. Under the Speaker's announced policy of
January 9, 2023, the Chair recognizes the gentleman from Kansas (Mr.
Estes) for 30 minutes.
General Leave
Mr. ESTES. Mr. Speaker, I ask unanimous consent that all Members have
5 legislative days to revise and extend their remarks and include
extraneous material on the subject of this Special Order.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Kansas?
There was no objection.
Mr. ESTES. Mr. Speaker, it is a new year, and the House is already
busy tackling issues important to Americans. Something that should be
high on our list is advancing legislation that will benefit our
economy, U.S. innovators, and American workers--and that is immediate
R&D expensing.
Tonight my colleagues and I want to talk about how this critical
provision encourages research and development in the United States,
and, in turn, helps fuel job growth and keeps manufacturing inside our
borders.
Recognizing this, for nearly 70 years the tax code allowed businesses
to fully deduct their R&D expenses in the same year in which they were
incurred. However, since the beginning of 2022, businesses have been
required to spread out, or amortize, R&D expenses over 5 years for
domestic R&D or 15 years for foreign R&D.
As you can see on this graph, since amortization took place, the
growth rate of R&D spending has slowed dramatically from 6.6 percent on
average over the previous 6 years to less than one half of 1 percent
over the last 12 months.
This slump in U.S. R&D investment is hurting the American economy at
a time when rising inflation is hurting workers and holding back job
creators.
As companies spend far less on R&D, the sector is down by more than
14,000 jobs. Three-quarters of research and development spending is on
salaries and wages, making R&D amortization primarily a jobs issue.
On the other hand, our main competitor, China, has seen its R&D
investment increase by 400 percent in just two decades. While the
United States' share of global R&D investment in 2019 had dropped to 30
percent, China's share had moved up to 24 percent--in fact, up from 15
percent in 2009, a jump of nearly 10 percentage points in 10 years.
They achieved this impressive growth by implementing the deduction of
200 percent on eligible R&D investments. Without action, the United
States will fall even further behind.
But we have the solution, and it is backed by Members in 43 States
and from both sides of the aisle.
On tax day of this year, I reintroduced H.R. 2673, the American
Innovation and R&D Competitiveness Act. This bipartisan bill corrects
the R&D amortization issue and will spur homegrown research and
development. And we know that where R&D occurs, jobs and economic
opportunities follow.
{time} 1900
Mr. Speaker, the American Innovation and R&D Competitive Business Act
has 212 cosponsors in addition to myself and a lead Democrat. Those are
nearly evenly split between Democrats and Republicans. It is the 17th
most cosponsored piece of legislation in this Congress. Tonight, my
colleagues are going to help me share the decisive difference it would
make for workers and innovators in each of their districts.
As I wrote in an op-ed in December, the best time to address R&D
amortization was at the end of 2021. The best next time is now. We need
to pass R&D immediate expensing for the American people and our U.S.
economy.
Mr. Speaker, I yield to the gentleman from Texas (Mr. Arrington), the
chair of the Budget Committee and my good friend.
Mr. ARRINGTON. Mr. Speaker, I thank the gentleman from Kansas who
represents a district that may be the second largest production ag
district only to west Texas, the food, fuel, and fiber capital of the
world.
In all seriousness, spending is out of control like never before in
this country. Our debt is unsustainable, which is an understatement,
maybe the biggest one of the night, and America's fiscal health is in
rapid decline.
What is the formula? Reverse Biden's spending spree, right-size this
bloated and weaponized bureaucracy, rein in mandatory spending, reform
entitlements, root out all of this trillions in waste and fraud, and
then return to progrowth, prowork, proenergy policies.
That last piece is critical. In order for us to bring this
indebtedness in this great country of ours--it has surpassed World War
II as the highest levels of indebtedness in the history of our country.
We have to have growth. Growth is essential not only to reining
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in deficits. It generates more revenue for the country and reduces
spending by giving Americans better-paying jobs and allowing people to
save and invest more of their hard-earned money.
CBO projects over the next 10 years we will have a paltry 2 percent
economic growth. If we grow 1 more percent, we can help bring the
deficit down by $3 trillion. We need $16 trillion, Mr. Speaker, in
order to balance the budget, so growth will play a critical role.
In 2017, Republicans and President Trump passed tax reform. After
that, we saw unprecedented, record investment in R&D, capital
investment, growth, job creation, lowest unemployment, lowest poverty
rates, lifting 6 million people out of poverty in this country. It had
tremendous value to the country as a whole. All boats rose on the tide
of prosperity.
In fact, the CBO projected that we would only grow the revenue from
the tax cuts by $327 billion in 2021, the year after, and the revenues
actually grew by tens of billions more. The following year, 2022, the
CBO projected $353 billion. They were off by $100 billion. We got
record revenue.
One of the biggest progrowth provisions in the Tax Cuts and Jobs Act
was 100 percent business expensing. We need to give businesses the
certainty to make the investment, supercharge America's
competitiveness, and create more things in this country instead of
depending on other countries for important products, making sure that
we stave off what is projected to be a sustained recession if not
stagnation.
We can do this, address inflation, save this country from a debt
crisis, and reverse the curse of these failed economic policies and
this unbridled spending. We can do it in part with progrowth, prowork,
and proenergy policies.
I am proud to work alongside my friend from Kansas, a true leader on
the Budget Committee, on the Ways and Means Committee, and on all
things progrowth and making America the most powerful, most prosperous
Nation in the world. I thank Mr. Estes for his leadership.
Mr. ESTES. Mr. Speaker, Mr. Arrington has obviously delved into this
issue and particularly focused on economic growth and what the impact
is in terms of the value for not just the economy and workers across
the country but also the tax revenue to help make sure we can fund the
operations here in government.
Mr. Speaker, I yield to the gentleman from Oklahoma (Mr. Hern), the
chair of the Republican Study Committee, a fellow member of the Ways
and Means Committee, and my friend and neighbor to the south.
Mr. HERN. Mr. Speaker, it is great to see my colleague from Oklahoma
from the Second District, our newest member of our Oklahoma delegation.
I certainly know where his heart is on these issues that American
taxpayers rely on us to be responsible for and for the money to be put
to good use.
We have a critical tax cliff fast approaching at the end of 2025,
with the majority of the TCJA's progrowth tax policies expiring. We are
already seeing the devastating economic effects of TCJA's expired
provisions, including the EBITDA interest deduction limitation,
immediate deduction of R&D, and 100 percent bonus depreciation.
Ernst & Young projects that over 10 years, if the increased
limitation on the interest deductibility is not repealed, 900,000 jobs
will be lost; employee compensation will be reduced by $58 billion; and
GDP will fall by more than $108 billion.
Twenty-six OECD countries use earnings before interest, tax,
depreciation, and amortization, otherwise known as EBITDA, as an
earnings-stripping limit, and zero countries in the OECD use the new
U.S. EBIT-based limitation.
This stricter limitation on businesses will fall on the American
worker in the form of lower wages and employment and make the U.S. less
competitive in the global marketplace. We need to restore the EBITDA
interest deduction limitation immediately.
Since the harmful R&D amortization requirement took effect in 2022,
R&D spending's rate of growth has slowed dramatically, from 6.6 percent
on average over the previous 5 years to less than 1 percent over the
past 12 months.
China continues to offer a 200 percent super-deduction for R&D, and
the United States remains uncompetitive at 20 percent. We need to
restore immediate deduction for R&D costs, something that has been
around since the middle 1950s.
Bonus depreciation will continue to ramp down for ensuing years: 80
percent in 2023, 60 percent for this year, 40 percent for 2025, 20
percent for 2026, and zero percent beginning in 2027.
Last year, the U.K. announced its commitment to make permanent its
progrowth policy for full expensing. The U.S. should be looking to do
the same to remain competitive in the global marketplace.
Mr. Speaker, this is more than just an economic issue. This is a
national security issue. How can we expect to compete with China when
it is more expensive to invest, innovate, and grow here in the United
States of America?
Mr. ESTES. Mr. Speaker, Mr. Hern highlighted that it is so important
for us to have a strong America. It means we need to have a strong
economy and good-paying jobs for workers, which means we need to have
these provisions that make things work and make the economy grow.
Mr. Speaker, I yield to the gentlewoman from West Virginia (Mrs.
Miller), a member of the Ways and Means Committee and a good friend of
mine.
Mrs. MILLER of West Virginia. Mr. Speaker, I rise today to express my
support for American innovation and to highlight the importance of a
progrowth tax code.
The United States was built on resourcefulness and good ideas. The
desire to be successful in whatever we do has made America the top
place to live, work, and raise a family.
Part of what makes the United States the best place in the world to
do business is that we respect our workforce and encourage them to
think outside of the box.
Because of the Tax Cuts and Jobs Act, our tax code was strengthened,
jobs were created, and the economy flourished. Some of the provisions
have now expired. It is a problem. It is imperative that we make the
TCJA permanent.
For example, if we cement the Tax Cuts and Jobs Act, we can reverse
the current limitation on the deductibility of interest payments on
business loans. That will save over 850,000 American jobs.
Another example is in research and development. While it was once a
paid expense, R&D is now a cost that many small businesses cannot
afford. China is subsidizing their R&D costs, giving them a huge
advantage over the United States. Modernization and national security
shouldn't suffer because of any lapsed tax change.
Our tax code should work for American workers and businesses and not
against them.
Mr. Speaker, I thank Mr. Estes for this Special Order tonight.
Mr. ESTES. Mr. Speaker, I am glad Mrs. Miller highlighted the impact
on small businesses because that is one of the things that sometimes we
think about, business provisions that affect large businesses, but
small businesses are greatly affected as well by some of these
provisions just because of being able to manage their cash flow.
Mr. Speaker, I yield to the gentleman from Tennessee (Mr. Kustoff),
another good friend of mine who is also on the Ways and Means
Committee.
Mr. KUSTOFF. Mr. Speaker, I thank our colleague from Kansas for
getting this together this evening to discuss our important issues so
the American public can hear from us.
Mr. Speaker, I rise today to speak about three progrowth tax policies
that are critical for businesses and workers across west Tennessee and
across the Nation: bonus depreciation, business interest deductibility,
and immediate expensing for research and development costs. These
policies help businesses grow, create jobs, and invest in our
communities.
It is crucial that Congress extend these policies to ensure our tax
code remains competitive and encourages economic growth.
Mr. Speaker, Republicans passed the Tax Cuts and Jobs Act of 2017,
and it led to one of the strongest economies in our Nation's history.
One important piece of the Tax Cuts and Jobs Act, known as bonus
depreciation, allows businesses to fully and immediately deduct the
cost of certain capital investments. If we want businesses to continue
investing in their
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workers and in their future, bonus depreciation must be extended.
Domestic investment will also be strengthened by restoring business
interest deductibility. Interest deductibility has served as a vital
tool for manufacturing and other capital-intensive businesses.
Restoring this provision will protect American jobs and keep
manufacturing right here at home in the U.S.
Mr. Speaker, for decades, America has been the global leader in
innovation and the go-to destination for startups and entrepreneurs. It
is important that we keep it that way.
Allowing U.S. businesses to immediately deduct research and
development costs will lead to more innovation, more domestic
investment, and more jobs.
I have heard from west Tennessee businesses, large, medium, and
small, and they are asking Congress to pass these three provisions.
Mr. Speaker, I ask all of my colleagues in the House of
Representatives to stand with American businesses and workers and
extend these critical provisions.
Mr. ESTES. Mr. Speaker, I thank Mr. Kustoff. It is so important, as
he highlighted, to have innovation and to support that so that we can
have good economic growth. That is a key thing that has always helped
America over the long term.
Mr. Speaker, I yield to the gentleman from Utah (Mr. Moore), the vice
chairman of the House Republican Conference and a fellow member serving
on the Ways and Means Committee.
Mr. MOORE of Utah. Mr. Speaker, I rise this evening, along with my
colleagues, in support of critical progrowth tax policies House
Republicans are supporting to bolster good-paying jobs and strong wage
growth for earners. These are solutions that will ultimately help Utah
families flourish and help the entire Nation.
We have seen that tax policy can make a difference for the American
people. In 2018 and 2019, following the passage of TCJA, real median
household income rose by $5,000 and real wage growth increased 4.9
percent, the fastest 2-year growth in real wages in over 20 years.
Since then, we have seen the expiration of three important tax
provisions that support these job creators and workers. It is not an
exaggeration to say that my team and I have had thousands of
conversations over the last few years about how these provisions
contribute to the ability of businesses to expand, innovate, and invest
in workers, communities, and the economy. These include the ability to
immediately deduct R&D expenses, the more generous limitation on
business interest expenses, and the 100 percent bonus depreciation for
equipment and vehicles. These provisions of the tax code were crucial
for job creators, workers, and their families in Utah.
Lastly, according to SBA, over 600,000 Utahns are employed by small
businesses. My Small Business Growth Act, which would lift the
deduction cap for qualifying equipment for small businesses, would help
these small businesses grow their workforce in northern Utah.
Mr. Speaker, I will close by noting that these policies are
fundamentally about the American workers in every congressional
district across the country and the investments that we can make in
them as well as their families and their communities.
Mr. Speaker, I strongly urge my colleagues to work together to get
these policies over the finish line.
{time} 1915
Mr. ESTES. Mr. Speaker, I thank the gentleman from Utah (Mr. Moore).
It is important to talk about these very important issues.
Mr. Speaker, may I inquire how much time is remaining.
The SPEAKER pro tempore. The gentleman from Kansas has 11 minutes
remaining.
Mr. ESTES. Mr. Speaker, I yield 2 minutes to the gentleman from
Indiana (Mr. Yakym), who has shown great interest in being engaged in
this issue of how do we actually reinstate the R&D immediate expensing.
Mr. YAKYM. I thank the gentleman from Kansas, my good friend, for the
time and for organizing this important event and for this Special
Order.
I also thank the gentleman for his leadership on promoting pro-growth
research and development policies.
Mr. Speaker, we are living through a time of great economic
uncertainty created by the Biden administration.
This Republican House has an opportunity to provide some certainty to
all American families and businesses by bringing back full and
immediate deductions for research and development, capital
expenditures, as well as by undoing lower interest deductibility
limitations. Doing so would help create high-quality, good-paying jobs
across our economy for businesses of all shapes and sizes.
My district in northern Indiana is no different. Many Hoosier
companies have reached out to tell me what fixing those provisions
would mean to them.
A major medical device company in my district had a $60 million
impact in 2022, because they couldn't fully deduct their research and
development expenses, and they expect a similar hit for 2023. That is a
huge sum of money to be sucked out of our local economy unnecessarily.
However, the impacts aren't just felt in large gashes. There are
thousands of less-visible cuts across Main Streets in my district, in
our State, and across our country.
Family owned restaurants have told me they are putting off buying new
kitchen equipment. Engineering firms that build our roads and bridges
are holding off on new cutting-edge software. Also, suppliers to the
R.V. and auto industry are spending less money on new machinery.
Mr. Speaker, the small businesses that are the engines of our economy
have sand in their gears, and we have an opportunity to fix it.
About a month and a half ago, I was proud to lead a letter to Speaker
Mike Johnson signed by 145 of my non-Ways and Means colleagues
calling for the return of full expensing for R&D and capital
expenditures, as well as pro-growth interest deductibility. The high
turnout shows just how important these provisions are to small
businesses and workers across our great Nation.
I know my friend, Ways and Means Chairman Jason Smith, is hard at
work on negotiations to fix these provisions. I hope both sides can
come together on an agreement that provides wins for hardworking
Hoosiers of Indiana's Second District.
I want to close by thanking Mr. Estes once more for his leadership in
organizing this Special Order.
Mr. ESTES. I thank the gentleman. It is so important that the
gentleman has taken such an active interest.
I now recognize for 2 minutes the gentleman from Alabama (Mr.
Strong), a friend of mine, and a good guy.
Mr. STRONG. I thank the gentleman from Kansas for yielding.
I rise to support the extension of critical provisions from President
Trump's signature tax law, the 2017 Tax Cuts and Jobs Act. This tax
policy unleashes America's ingenuity and the full potential of the
American economy. It helps individuals and families take home more pay
each month. It supports American investments in research and
development. It signals to our business community that America values
and supports domestic innovation.
This tax policy is also necessary to stay ahead of global
competitors. Small businesses in north Alabama directly benefit from
research and development expensing. It allows them to reinvest in their
products and people. It stimulates the economy, encourages investment,
and creates jobs.
President Trump's legislation started an era of increased investment
in the U.S. and produced an economy with record gains. If we fail to
extend this critical tax provision, we fail American businesses.
I urge Congress to act and extend these provisions.
Mr. ESTES. I thank the gentleman for speaking about some of the
important impacts on businesses within his district.
Mr. ESTES. Mr. Speaker, I yield 2 minutes to the gentlewoman from
Texas (Ms. De La Cruz).
Ms. De La CRUZ. Mr. Speaker, I thank the gentleman for hosting this
Special Order.
I stand before you today as a mom and a lifelong small business owner
to champion the cause of small businesses by encouraging my colleagues
to work swiftly to extend three vital tax provisions from the TCJA.
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These provisions include the full expensing of critical research and
development, the full expensing of investments in new equipment,
machinery, and technology, and also business interest deductibility.
These provisions are tools that empower small businesses to drive
innovation, create jobs, and make ``el Sueno Americano,'' ``the
American Dream,'' a reality for families all across America.
I urge my colleagues to join me.
Mr. ESTES. Mr. Speaker, it is great that we have so many people from
so many different districts talking about issues that are important to
them and seeing the wide impact across the country.
Mr. Speaker, I recognize for 2 minutes the gentleman from Texas (Mr.
Moran), another member of the Texas delegation, and a good friend of
mine.
Mr. MORAN. Mr. Speaker, more jobs, better pay, and a stronger
economy--that is the result when taxes are low.
I rise today in support of extending the pro-growth tax provisions of
the Tax Cuts and Jobs Act of 2017 that are critical to families and
businesses, items like immediate R&D expensing and allowing for full
bonus depreciation in the year in which those expenses were incurred.
Through provisions like these, the Tax Cuts and Jobs Act of 2017
ushered in a competitive Tax Code that encouraged companies to invest
in American jobs, and it served as a catalyst for innovation
nationwide. These provisions lifted more than 6 million people out of
poverty, grew wages by 4.9 percent, and spurred American innovation to
new heights.
Also, these pro-business and pro-family tax provisions will play a
vital role in advancing the American economy, boosting wages, and
maintaining U.S. competitiveness worldwide into the future, but only if
we make them permanent.
Unfortunately, allowing these pro-growth tax provisions expire or
remain expired would be devastating to our economy. They would slow the
economy, decrease wages, halt job growth, and stifle investment and
innovation. This is not the direction that hardworking Americans want
us to go. This is not the direction of America.
Mr. Speaker, I stand with American businesses and hardworking
Americans everywhere, including in east Texas that I represent, and I
encourage my colleagues to make these expiring tax provisions
permanent. We must act now to make these provisions permanent and
reduce the tax burdens on our businesses, to see our economy thrive and
grow and to see our families benefit as a result.
Mr. ESTES. Mr. Speaker, I appreciate the gentleman participating and
highlighting how important it is in the Congressman's district and the
impact on that part of the country in Texas.
Wichita, where I am from, is known as the Air Capital of the World
for its pioneering role in the early days in American aviation. Today,
in south central Kansas, it is brimming with companies continuing to
push the limits of the aerospace industry, including in general and
commercial aviation, but also space, defense, and unmanned aircraft
systems.
All of these new advances in Kansas that developers, engineers, and
manufacturers want require technology, and they require research and
development, but these innovators tell me that the incentive just isn't
there. Knowing that they have to amortize their R&D costs prohibits
them from pursuing these technological advances. Let's change that by
restoring immediate R&D expensing.
As I mentioned earlier, R&D expensing is primarily a jobs issue, and,
without an incentive for home-grown R&D, the U.S. loses out on creating
new jobs. As the R&D Coalition says, for every $1 billion of U.S. R&D
spending, 17,000 jobs earning $1.4 billion are supported in the United
States.
They also note that, if the R&D amortization policy is not reversed,
the United States stands to lose 410,000 jobs, $57.5 billion in labor
income, and $71 billion in R&D spending over the next year, and it is
going to make America less competitive on the world stage.
Mr. Speaker, I thank the Members who shared their experiences and
what we have heard from districts all across the country on this very
important issue. As we have discussed here tonight, R&D expensing
legislation is critical for our job creators, innovators, and everyday
Americans. The health of our economy depends on us passing this
bipartisan, commonsense legislation.
The legislation has broad support from Members in 43 States and both
parties. As I said in my opening remarks and in the op-ed last month,
the time to address R&D amortization may have been at the end of 2021,
but with the start of the new tax-filing season a few weeks away, the
next best time is now.
Mr. Speaker, I yield back the balance of my time.
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