Who needs R&D tax credits?

No one with a brain makes an R&D decision based on tax credits. We make those decisions to try for a competitive advantage. If we don’t achieve that advantage, we shouldn’t expect to be partially reimbursed for the effort just to have our butts protected in a plea for fairness.

Peter Kissinger
Who needs R&D tax credits? No one! As the year finishesout, I foresee more sausage-making on taxes and reducing federal expenses toavoid a sequester event. It won't be pretty, and perhaps Congress will just putthe whole thing off for a few months. When I am sequestered, my goal is to beisolated from other people to avoid disturbances, allowing for quietcontemplation.
 
 
It is on such occasions that I think about this column. Ourcurrent troubles stem from a widely embraced entitlement attitude that iswrapped in the utopian concept of fairness. Taking has surpassed making in our collective consciousness. Thisthinking evolved over 50 years, but has been rapidly accelerating of late.
 
 
We all take because others take, and it's about getting ourfair share, or preferably, more. As making goes down and taking goes up, thepool we take from gets smaller and smaller. Proceeding along these lines hasresulted in an unsustainable machine, decelerating from the frictionsregulating business while complicating our tax system.  The word cliff has been used appropriately,and We The People (WTP) are heading for it fast.
 
 
Scientists fit the pattern nicely. We want grants and wewant tax credits as incentives that we surely deserve for life sciences,climate research, alternative energy sources, nanotechnology and … After all,science is such a tiny part of government expenditures. 
 
Balderdash. To avoid the fiscal cliff andclimb over the mountain of debt will require several decades. We will not getthere until we moderate the entitlement mentality and return to being more makersthan takers. The principles are well established by experiments completed in multiplecountries over centuries, and the message is very clear. Government will haveto focus, as it once did, on doing fewer things well.
 
The private sector will have to focus on investment,innovation and growth. Business must stop its own "working the system" withthat game we call crony capitalism. Large firms get away with this by threats("We'll move our headquarters. We'll close our factories."). These tantrumsfrequently engender a deal ("Here is your tax concession."). These temptationswould go away with a one-size-fits-all tax system focused on individuals. 
 
No one with a brain makes an R&D decision based on taxcredits. We make those decisions to try for a competitive advantage. If wedon't achieve that advantage, we shouldn't expect to be partially reimbursedfor the effort just to have our butts protected in a plea for fairness. Itlikewise is insane to tax the revenues of medical device companies, irrespectiveof their profitability. 
 
Is there a psychiatrist in the house? It makes as littlesense to tax business income as it does to offer tax credits for wind, biofuelsor R&D. Business taxes are taxes on employees, customers and shareholders. WTPmust raise revenue for those few things we need our federal government to dofor the common good, among them paying down our severe debt. The best way to dothat is with minimum friction from credits, deductions, preferences andpolitical donations. Broadening the base of individuals who pay (and businessesif they must), reducing the rates they pay and simplifying the paperwork hasbeen overwhelmingly recommended by every bipartisan group who has seriouslystudied the problem. It is time to just do it. Science and technology basedcompanies, energy firms included, should neither be punished nor rewarded morethan all the rest. 
 
 
We now enter the time for giving thanks and enjoying theshortest days of the year with traditional decorations, songs, feasts and hopefor a new year, one with the unluckiest sobriquet of the new century, 2013. Let'sdefy that label, declare an armistice between political parties and actually fixthings for the long term.
 
 
WTP are unemployed because capital is unemployed. Capital isunemployed because it foresees an unreliable future for returns. Allow capitalto do its work, and our economy would recover very quickly. We could startpaying down the debt with restrained spending with increased tax revenue. Thereis no alternative if we accept survival as the preferred option. We will notsurvive if we remain takers all. Enjoy the holidays, the purest of these beingThanksgiving. It's better to make than to take.
  
Peter T. Kissinger isprofessor of chemistry at Purdue University, chairman emeritus of BASi and adirector of Chembio Diagnostics, Phlebotics and Prosolia.
  
 
  
  
 
 

Peter Kissinger

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