Weighing The R&D Tax Credit

Should Congress extend the recently expired "temporary" 14-year-old research and development tax credit, make it permanent, or let it pass into oblivion? Ideally the answer should depend on the credit's effectiveness. But as a recent report by Congress' now-defunct Office of Technology Assessment makes clear, effectiveness depends on the goals sought. The OTA says the credit produces about $1 in additional R&D outlays for each $1 of lost tax revenue. Thus, it is clearly effective in boosting corporate R&D spending at the margin.

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