'US must update tools for rewarding R&D activities'

OPINION: Hillary Clinton

If the US wants to remain as the global leader in cutting edge research, innovation and high-wage job growth, we must update our tools for rewarding these activities. The R&D tax credit has proved to be a successful, cost-effective tool to increase investment in research jobs in the US and to make the US a more attractive venue for global R&D [Atkinson, 2007].

Two decades ago, the US offered the most generous R&D tax benefits in the world. Today, we have fallen to 17th "� below even Mexico. At a time of increased global competition and increasing pressure on US wages and jobs, this decline provides further incentive for companies to look overseas when making investment decisions. We need to update this tax credit to respond to the needs of our 21st century economy. She will:

1. Increase the R&D credit by 50 per cent to give companies a strong incentive to invest in research jobs in the US.

Create a 40 per cent Basic Research Credit that will reward collaborative research done to help drive innovation and job growth.

Create a new Start Up Research Jobs Credit, which will give companies with no prior research expenses access to tax incentives.

2. Creating new high-tech jobs across the US with at least 15 new Innovation and Research Clusters across the US: "Clusters" or "innovation hot spots" are hubs of economic activity that exhibit superior growth rates of investment, productivity and wage gains for local communities [Center for American Progress, 2007].

Senator Clinton believes we should be aggressively supporting regional clusters that leverage local assets, drive economic growth and create high-wage jobs. In addition to offering her new 40 per cent credit for basic research, Senator Clinton will launch a new programme of tax exempt bonds for states and local governments to build research parks. And she will catalyse the creation of at least 15 major research clusters during her first term.

3. A new Insourcing Markets Tax Credit to spur business investment in communities facing global competition: Building off the success of the New Markets Tax Credit Program, Senator Clinton will launch a new public/private partnership to bring new investment and jobs to communities that are vulnerable to global competition, and provide them with the tools to become leaders in our economy. While the NMTC has played a crucial role in bringing investment and job growth to poor and underserved areas, many communities impacted by globalisation have acute needs: requiring large and fast-acting infusions of capital to diversify and modernise in the wake of job losses and unemployment.

In addition to reauthorising the NMTC, Senator Clinton will create a new $5 billion Insourcing Markets Tax Credit dedicated to communities impacted by global competition, trade and technological change.

A "Made Green In America" Fund: Hillary will invest $500 million annually in a "Made Green in America" fund to encourage the creation of high-wage jobs in clean energy manufacturing technologies.

A Green-Manufacturing Extension Partnership (G-MEP): The Manufacturing Extension Partnership (MEP) is a highly effective programme that provides technical and business assistance to small and medium-sized manufacturers to help them improve productivity and create and grow the number of good-paying jobs in this country. Hillary has already called for doubling the MEP to support a more vibrant 21st century manufacturing sector.

4. Close loopholes in our tax code that encourage companies to ship jobs overseas. As President, Senator Clinton will overhaul our international tax system to remove incentives for companies to locate jobs and capital overseas and to crack down on abusive offshore tax havens.

(Extracts from a report posted on Democratic Party candidate for US presidency Hillary Clinton' website by Lindsay Levin on a speech made by Clinton at Pittsburgh on April 2)