House Minority Leader Rep. Kevin McCarthy (R-Calif.) and Ways and Means Ranking Member Rep. Kevin Brady (R-Texas) have released H.R. 11, “The Commitment to American Growth, Renewal, and Opportunities for Workers, Technology, and Health” (GROWTH) Act.
This legislation contains targeted tax cuts that will help the American economy rebound as the pandemic runs its course.
This effort from House Republicans draws a sharp contrast to Democrat nominee Joe Biden’s plan to impose at least $4 trillion in new or higher taxes including income tax increases, business tax increases, and capital gains tax increases. As part of this proposal, Biden has called for repealing the Tax Cuts and Jobs Act (TCJA), which will increase taxes on Americans at every income level.
The Commitment to American GROWTH Act will benefit workers, families, and small businesses with further tax cuts that will foster innovation, encourage research and development, and secure America’s medical supplies through four main provisions:
Strengthening Pro-Growth Tax Cuts to Boost Jobs and Wages
First, the bill locks in key provisions from the Trump Tax Cuts that support American jobs and paychecks. This legislation would make full business expensing permanent, as well as the business interest limitation of earnings before interest, taxes, depreciation, and amortization (EBITDA).
Full business expensing reduces taxes by allowing businesses to deduct the cost of new investments (machinery, equipment etc.) in the year they are made, which incentivizes growth, increases productivity, creates jobs, and raises wages. This also simplifies the tax code by equalizing the tax treatment of new investments with other business expenses such as wages, rent, and healthcare costs.
In a post COVID-19 world, expensing will help businesses make vital investments as they seek to bring workers back, onshore manufacturing capabilities, and ramp up production. Making these provisions permanent will incentivize long-term investments by providing business certainty.
Supporting and Strengthening American Innovation
This bill also encourages investment in research and development (R&D) so American businesses can continue to make, buy, and sell American made products.
Much like full business expensing of new investments, full R&D expensing creates an incentive to increase capital investment, which leads to stronger economic growth, more jobs, and higher wages. The bill proposes doubling the R&D tax credit, which will encourage more American investment and economic growth. The R&D credit is a general business tax credit companies that incur research and development (R&D) costs in the United States.
Jobs tied to R&D are quality, high paying jobs. In 2017, the average wage for R&D related jobs was $134,978 – 2.4 times higher than the average wage, according to the Bureau of Labor Statistics. Doubling the R&D tax credit will help create more of these quality jobs.
Incentivizing research will make America a more attractive place to grow a business, and it supports high-paying jobs in production and applied research, ultimately, a higher standard of living for all Americans.
Encouraging investments in advanced medical manufacturing
In addition, to strengthening R&D, the bill contains targeted reforms to strengthen American medical development so that our country is not overly reliant on China.
Startup businesses seeking to develop a cure usually have no revenue; therefore, they see no benefit from R&D credits. This provision fixes this aspect, but also provides additional liquidity to startups so they can continue their research. This credit is to be monetized in order to help pre-revenue medical research companies – such as small biotech firms on the frontlines of cures research. In addition, it encourages outside investment in infectious disease drug development firms by allowing any losses to offset other income.
Investments in advanced manufacturing will help the United States regain its status as a global leader in manufacturing. Growth in America’s medical independence will help retain and create high paying jobs, support domestic innovation, and enhance national security—especially from China—and increase public health.
Providing liquidity for businesses as they seek to develop cures
This bill encourages growth and innovation in technology breakthroughs by incentivizing outside investment in startup medical research firms.
By giving additional tax benefits to investors in certain infectious disease drug development firms, this will help induce investment in medical research startups. This bill will allow America’s innovators to create new companies, such as ones that are working on cures to deadly and rare diseases. H.R. 11 will allow research startups that change ownership to utilize net operating loss carrybacks which will give startup businesses an additional source of liquidity.
Growth in innovation and technology breakthroughs gives American innovators a leg up as they work on research and development of new technological findings.
The best path to rebuilding the economy is pro-growth policies, not tax hikes and intrusive regulations. The Commitment to American GROWTH Act contains a number of targeted provisions that will help the economy recover, policies that draw a sharp distinction to the tax hikes that Democrats support.