US Rep. Dan Meuser (PA-9), Chairman of the Small Business Subcommittee on Economic Growth, Tax, and Capital Access, led a hearing Tuesday entitled “American Ingenuity: Promoting Innovation Through the Tax Code.” The hearing focused on examining tax policies, such as the R&D Tax Credit and Bonus Depreciation, that support business growth and innovation.
Two witnesses from Schuylkill County—Julie Masser Ballay, CFO of Sterman Masser Inc., and Bill Wydra, President of Ashland Technologies—participated in the hearing. They presented their perspectives on the implications of changes in tax policy on small businesses.
In his remarks, Meuser highlighted the importance of maintaining incentives for innovation in light of increasing international competition. He emphasized the potential negative consequences of repealing the R&D Tax Credit and the scheduled reductions in bonus depreciation. “The repeal of the R&D Tax Credit and the sunsetting of bonus depreciation…will have grave consequences on American entrepreneurs,” he stated.
Wydra expressed gratitude for the attention given to these issues, noting their importance to small businesses. He cautioned that the proposed changes to bonus depreciation and R&D tax credits could impact investment decisions, hinder expansion plans, and strain available cash for hiring and talent development programs.
Ballay voiced the importance of such tax incentives for small and family-owned businesses, particularly in the agricultural sector. She cited bonus depreciation as a valuable resource for reinvesting in her business, ensuring competitive innovation, and supporting their workforce.
The U.S. tax code has historically incentivized businesses to invest in R&D. These provisions, such as R&D expensing and bonus depreciation, enable businesses to offset the costs of investment in tangible and intangible assets. However, the recent repeal of immediate R&D expensing and the scheduled reductions in bonus depreciation could potentially affect U.S. competitiveness on the global stage.
Despite the U.S.’s reputation as a top innovator, other nations’ tax incentives for R&D often exceed those offered in the U.S. In 2020, U.S. government tax support constituted only 9.5% of R&D spending in the economy. Some experts argue that to maintain competitiveness in R&D, this rate should increase to at least 15.5%.
With immediate expensing repealed, the U.S. lags behind other countries like China, whose R&D tax incentives are significantly more generous. As of 2021, China allows a 200% deduction of eligible R&D expenses for manufacturers, and extends this to small and medium-sized technological enterprises, non-profit scientific R&D institutions, and higher education institutions as of 2022.
Watch the full hearing here:
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