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E&Y Study Says R&D Tax Credit Creates U.S. Jobs, Boosts the Economy & Spurs Innovation

09/20/2011
A new study released by The R&D Credit Coalition reveals that the federal research and development (R&D) credit is having a significant positive impact on the American economy and private R&D spending.

Ernst & Young produced the study, entitled The R&D Credit: An effective policy for promoting research spending. Its key findings include:

  • The existing credit is estimated to increase annual private research spending by $10 billion in the short-term, and by $22 billion in the long-term (beyond the first several years). This is substantially higher than the credit's roughly $6 billion to $8 billion annual revenue cost.

  • Strengthening the credit by increasing the simplified credit from 14 percent to 20 percent is estimated to increase annual private research spending by an additional $5 billion in the short-term, and an additional $11 billion in the long-term.

  • In total, the overall policy (the existing credit plus strengthening the alternative simplified credit) is estimated to increase annual private research spending by $15 billion in the short-term, and $33 billion in the long-term.

  • Research-orientated employment in America would be 130,000 workers higher in the short-term, and 300,000 workers higher in the long-term, as a result of combining the existing credit and the strengthening of the alternative simplified credit.

Coalition Chairman Ronald Dickel said the report shows the R&D credit "encourages businesses to make long-term investments in U.S.-based R&D that will create U.S jobs, boost the economy, and continue to spur innovation. We encourage Congress to make the tax credit a more effective incentive for companies to locate their R&D facilities and jobs in the U.S."

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