How A Deal on R&D and CTC Can Help America Against China

In 2025, many of the tax extender provisions passed in recent years from the Tax Cuts and Jobs Act, American Rescue Plan, and other relief policies will come to an end . The span of these extensions are wide, affecting programs from the Child Tax Credit to railroad maintenance to business deductions for equipment and R&D.

Of the expirations, two are important for wildly different reasons: the Child Tax Credit and the Amortization of R&D Development.

The Child Tax Credit was doubled from $1,000 per child under 17 to $2,000 under the Tax Cuts and Jobs Act, and increased income eligibility for the program. It was grown even further under the American Rescue Plan Act under President Biden from $2,000 to $3,000 (for under 6, $3600), which represents a major increase in just five years, and made the program fully refundable.

The CTC both reduces tax revenues for the government by reducing the tax liability for parents, but also allows a cash payment to families who are owed credit and have zero tax liability.

The Child Tax Credit itself is supported across party lines, and according to a poll from Cygnal, nearly 42% of respondents wanted an expanded tax credit with more focus on working families. A work requirement is by itself a major point of contention between Republicans and Democrats, however, the existence of the program, and bringing tax dollars back to families currently struggling in our inflationary environment, is heavily supported.

The second expiration, the amortization of research and development expenses, is much more important from a national security perspective. The Tax Cuts and Jobs Act requires companies to “amortize”, or gradually write off their R&D expenditures over 5 years instead of deducting the costs of that research immediately. Lawmakers attempted to fix this in the Build Back Better Plan, but the legislation failed to pass. The amortization provision in the TCJA actually disincentivizes more innovative research on behalf of American companies because they’re less likely to incur costs they cannot see gains for in the immediate future. It won’t kill R&D completely, but cutting-edge or theoretical projects might not get the attention they otherwise might.

Why are these programs in particular so important?

Because we’re fighting for American rejuvenation in the face of growing adversaries abroad.

The United States is currently losing its grasp on world events – China invests more money in their own industry than ever before. Premier Li Qiang is pushing China to boost advanced manufacturing, and they already outpace the United States at sea with ever-expanding dockyards and ship construction. At home, Americans are struggling to provide for their families as record inflation decimates our ability to buy gas, groceries, and even our own homes. In order to sufficiently combat the growing instability at home and abroad, our families must become more secure than ever and our companies need to be investing in more innovative techniques to bring back jobs and retain our technical edge.