The real beauty about all US companies having their US R&D expenditures being stepped up is that US job creation almost automatically flows from it.
Why is that?
Because the overwhelming majority of R&D expenditures are people costs. If a business decides it is in its best economic interests to step up R&D spending, it will hire more people.
It's that simple.
And nothing is going to make the US more competitive in the long run than to invest in R&D today.
Given the just horrible US job situation, I am proposing here to double for the remainder of 2011, the R&D tax credits from the present 20% to 40% for all purely domestic companies and also for smaller multinational corps. And for all of 2012, the R&D tax credits for these companies would be increased from 20% to 30%.
The above smaller global corps would have the option of paying for all of their R&D tax credits earned in both all of 2011 and in all of 2012 by the additional federal income tax resulting from having some of their foreign earnings repatriated, which should be given an incentivized dividend received deduction of perhaps 30% or 40%. The Suits can decide the fair, most effective discount percentage here.
For all really large multinational corps, I would increase the R&D tax credits from 20% to 30% for the remainder of 2011, and from 20% to 25% for all of 2012, but they would be entitled to no R&D tax credit in either all of 2011 or in all of 2012, except to the extent it is 100% funded by a like amount of US federal income taxes from repatriating their foreign earnings used just for this purpose. I would consider granting these large global US companies an incentivized dividend received deduction of perhaps 10% to 20% on these foreign earnings repatriated used only to 100% fund their R&D tax credit. The Suits can decide the fair, most effective discount percentage here.
And the Suits can also decide the above key fair cutoff between the larger multinational corps and the smaller multinational corps. Perhaps, the Suits might decide it would be fairer to break down the multinational corps into more than just two groups.....smaller and larger. I would have no problem with that.
When I do the math, the above is more than paid for.
How could that be?
It's because of the substantial amount of additional US tax receipts that will come in from the foreign earnings repatriation. And these additional US tax receipts are not just on the increased R&D percentage related to multinational corps.
The twist here that pays for it all is that there will now be incremental US tax receipts from the foreign earnings repatriation on the existing 20% R&D tax credit for global companies. And these incremental foreign earnings repatriation taxes will be tied in to all of the R&D tax credits for all of 2011 and all of 2012.
Thus, it should more than cover the additional US government tax outflows from the increase in the R&D percentage from 20% to 40% for the rest of 2011, and from 20% to 30% for all of 2012, for the purely domestic companies.
Any excess funding raised here from the positive CBO scoring should be used on wisely designed, fairly selected, and quickly implemented US infrastructure investments.
