WASHINGTON — A tax credit that would make a popular, business-friendly tax break for corporate research and development a permanent part of the U.S. tax code was passed by the House of Representatives May 9 with a 274-131 vote.
But businesses shouldn’t break out the champagne just yet.
The Senate is at work on its own, less-sweeping version of the bill, which would extend the expired tax credit for two years. And even if the so-called R&D tax credit does survive both chambers of Congress, President Barack Obama has said he would veto it because of its hefty price tag.
Congressional budget analysts estimate the government would lose about $156 billion in revenue over 10 years under the House bill (HR 4438), which does not include any offsets to recover the tax credit’s cost.
“We ought to extend the research and development tax credit to help businesses invest in innovation and we ought to do it permanently,” Rep. Steny Hoyer (D-Md), the House Minority Whip, on the floor Friday. “But Republicans are asking us to it without paying for it, which would add $155 billion to the deficit.”
The credit has been extended 15 times since it was enacted in 1981, usually one or a few years at a time. Rep. Dave Camp (R-Mich.), chairman of the powerful House Ways and Means Committee said Friday that Democrats have voted for the R&D tax credit 71 times without offsets, including two affirmative votes from President Obama when he was a senator.
“Republicans and Democrats have long supported the research and development tax credit… because it allows companies to innovate,” Camp said. “Let’s stop the charade. This credit will be extended. Let’s give businesses the certainty they need, so they can grow and invest and create jobs.”
The plastics industry, particularly the Society of the Plastics Industry Inc., has been supportive of the bill, which was co-authored by Reps. Kevin Brady (R-Texas) and John Larson (D-Conn.).
"The tax credit is largely a jobs credit — 70 percent of credit dollars are used to pay the salaries of highly skilled R&D workers in the U.S.,” said SPI President and CEO William Carteaux, in a news release. “A robust and permanent research and development tax credit is critical to the plastics manufacturing industry’s competitiveness, innovation and job creation.”