Against Type, Deficit Panel Floats Permanent Tax Break for Corporate Research

Amid a report full of spending cuts and the elimination of many tax breaks, a bipartisan deficit panel has called for making permanent the research and development tax credit.

The tax credit, first adopted in 1981 and extended more than a dozen times for short periods, is supposed to provide incentives for U.S. companies to invest more in research. One U.S. president after another has asked Congress to make the credit permanent. But lawmakers, wary of its roughly $7 billion a year cost, have been reluctant to do so. Business leaders say that such temporary extensions discourage long-term investments in research because of the uncertainty that the tax credit will remain in place.

But within a controversial draft report issued Wednesday, the two chairs of the White House National Commission on Fiscal Responsibility and Reform, former Clinton chief of staff Erskine Bowles and former Senator Alan Simpson (R-ID), floated the possibility of making permanent the tax credit as part of a call to "Cut and Invest to Promote Economic Growth and Keep America Competitive." The chairs also said that "education, infrastructure, and high-value R&D" should be a priority, although they called for a 1% cut on discretionary spending in each of the years between 2013 and 2015.

While science lobbyists are pleased at that acknowledgement of the importance of research funding, they say the report omits an explicit distinction that science lobbyists have been calling for in deciding what should be cut and what should be preserved. "There are certain types of spending that should be viewed differently. We should be careful not to cut those areas which are critical for economic growth. We need to invest in those areas," said Toby Smith of the Association of American Universities, which laid out the concept of "investment" and "non-investment" spending earlier this year in testimony to the commission.

This week's report is a preliminary document representing the views of the panel's chairs. The final report, due out 1 December, could be much different because it is supposed to reflect a consensus among the commission's 18 members. But if a consensus cannot be reached, the final message from the commission could look very much like this report.