OPINION: Granting multinationals a special tax break for R&D might yield little or no benefit to the American people. Lawmakers should establish a few guardrails — to ensure that the U.S. economy gains something in return.
Right now, Congress is moving like a rummage sale. That’s because the current lame-duck session is racing to complete a potential $100 billion package of tax cuts. On the line are the usual trade-offs—Democrats seeking expanded child tax credits and Republicans pushing for private-sector tax breaks.
Desperate to regain this special R&D expensing in the end-of-year tax bill, multinationals are now warning that changes in their tax status could pose a threat to the U.S. economy. But that’s laughable. Congress currently has no guarantee that any of the tax breaks awarded to multinationals for their corporate R&D expensing will result in future U.S. intellectual property —or even new jobs in the U.S.
Since many R&D expenditures don’t result in new IP, Congress needs to attach these expenses to something tangible. A good example would be Israel’s Law for the Encouragement of Industrial Research and Development. What Israel accomplished demonstrates that a country can indeed establish rules for companies that use government money in their research.
Something in return Even though Congress is attempting to race through the end of their session, it should set meaningful expectations. It’s hard to establish something permanent in a lame-duck. But this would be at least the temporary price for an extension of R&D reimbursing.
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