« PreviousContinue »
IN 1981 COLLIDED SQUARELY WITH THE RECESSION. ALSO, THE INFLATION RATE
THE REPORT ALSO NOTED THE POSSIBILITY THAT R&D SPENDING COULD ACTUALLY RISE FASTER THAN ENVISIONED BY CURRENT PLANS. THIS IS BECAUSE PLANS FOR UPCOMING YEARS WERE MADE DURING THE DEPTHS OF THE RECESSION AND MIGHT WELL CHANGE AS THE RECOVERY PROCEEDS, AND ALSO BECAUSE IT WOULD BE CONSISTENT WITH PATTERNS IN RECENT HISTORY.
THE R&D TAX CREDIT CANNOT TAKE ALL OF THE CREDIT FOR THIS NEW TREND, OF COURSE. THE JUMP IN R&D SPENDING WAS GETTING UNDERWAY EVEN BEFORE IT WAS PASSED. BUT I AM CONVINCED THAT IT CONSTITUTED AN IMPORTANT ADDITIONAL STIMULUS.
I CAN SEE THE RESULTS IN THE HIGH TECHNOLOGY FIRMS IN MY OWN DISTRICT, COMPANIES LIKE WANG, DIGITAL, AND DATA GENERAL. THESE COMPANIES ARE REPORTING SIGNIFICANT INCREASES IN R&D SPENDING, INCREASES FAR BEYOND THE DOLLAR AMOUNT OF THE CREDIT. THESE INCREASES CAN BE SEEN BOTH IN ABSOLUTE DOLLARS AND AS AN INCREASING PERCENTAGE OF SALES--AT A TIME WHEN SALES THEMSELVES ARE ALSO
I HAVE RECEIVED TESTIMONY FROM ONE OF THESE COMPANIES, M/A COM, INC.,
I THINK WE SHOULD MAKE SURE THAT THIS TREND CONTINUES. A SHORT SPURT OF INCREASED P&D SPENDING, FOLLOWED BY ANOTHER DROP OR PLATEAU, IS NOT GOING TO KEEP THE ECONOMY HEALTHY IN THE LONG RUN. WE NEED A PERMANENT INCENTIVE. AND THE FACT THAT A SUNSET WAS WRITTEN INTO THE R&D TAX CREDIT PROVISIONS DOES NOT MEAN THAT THEY WERE NOT SUPPOSED TO BE A PERMANENT INCENTIVE. THE PURPOSE FOR THE SUNSET WAS TO GIVE CONGRESS A CHANCE TO SEE WHETHER THE TAX CREDIT ACTUALLY WORKED, AND WHETHER ANY OF ITS PROVISIONS NEEDED TO BE ADJUSTED TO MAKE IT WORK BETTER. THERE MAY WELL BE ROOM TO IMPROVE THE CREDIT, BY EXPANDING THE LIST OF QUALIFYING EXPENSES, FOR EXAMPLE; AND THIS IS SOMETHING WE SHOULD LOOK AT A LITTLE FURTHER DOWN THE ROAD. BUT FOR NOW OUR FIRST PRIORITY MUST BE TO RECOGNIZE THE FACT THAT THE CREDIT IS WORKING AND THAT WE SHOULD MAKE IT PERMANENT.
HY ELIMINATE THE SUNSET NOW? WHY NOT WAIT UNTIL CLOSER TO 1985, WHEN WE CAN BE MORE SURE OF EXACTLY HOW THE TAX CREDIT IS WORKING? FOR ONE VERY
IMPORTANT REASON: WE MUST CREATE A CLIMATE OF CERTAINTY FOR THE BUSINESSES
ANOTHER ARGUMENT MIGHT BE THAT WE SHOULD WAIT AND SEE WHAT THE ECONOMY
LOOKS LIKE BEFORE EXTENDING THE CREDIT.
AND LEASING PROVISIONS, EVEN AFTER TEFRA, WILL COST US $16 BILLION THIS YEAR AND $29 BILLION BY 1985, AND THE ECONOMIC BENEFITS HAVE PROVEN TO BE UNCERTAIN AT BEST.
THE P&D TAX CREDIT IS A PERFECT EXAMPLE OF HOW A GOOD TAX EXPENDITURE SHOULD WORK. IT IS SPECIFICALLY TARGETED. IT IS COST EFFECTIVE. IT PROVIDES A CLEAR SIGNAL OF A GOVERNMENT POLICY ON WHICH THERE IS A WIDESPREAD CONSENSUS. BUT IF IT CONTINUES TO BE HAMPERED BY THE SUNSET PROVISION, IT CANNOT, BECAUSE OF THE RESULTING UNCERTAINTY, CONTINUE TO WORK IN THE MANNER IN WHICH IT WAS INTENDED: AND ITS BENEFICIAL EFFECTS MAY BE ONLY TEMPORARY. IT IS
ESSENTIAL THAT WE ACT NOW TO KEEP THIS IMPORTANT PROVISION IN PLACE AS A PERMANENT
PART OF THE TAX CODE,
Subcommittee on Taxation and Debt Management
Senate Committee on Finance
May 27, 1983
Expanding research & development is important to the future of the United States and to M/A-COM; without R&D, industrial units rapidly become non-competitive.
OM/A-COM_R&D is directly responsible for our company's leadership and success by producing new products and processes in the telecommunications, defense and health fields.
The R&D tax credit has, by itself, stimulated us to make a greater financial commitment to R&D than we otherwise would have, which we expect will make us more competitive in international as well as domestic markets.
Refusal to make the credit permanent would tell corporate management that R&D is no longer a national priority; this would be the wrong signal to send.
M/A-COM, Inc., South Avenue, Burlington, MA 01803, (617) 272-9600