On Friday, Rep. Ron Estes (R-Kansas), introduced by Ways and Means Chairman Smith as "the leader of research and development, the gentleman who has advocated more to me on research and development than anyone else," moved to strike the last word in a Ways and Means Committee markup considering the Tax Relief for American Families and Workers Act. A stalwart advocate for American innovators and job creators, Rep. Estes' remarks focused on the importance of restoring immediate research and development expensing.
"The Tax Relief for American Families and Workers Act is a win for Kansans and all Americans," said Rep. Estes. "I’m so pleased that our work together on R&D expensing is a highlight of this bill, and coupled with other tax provisions, it will benefit the United States economy, small businesses, innovators, families and everyday Americans."
You can read the full remarks below.
Watch Rep. Estes' remarks at the markup here.
Thank you, Mr. Chairman, I move to strike the last word. I want to thank you, Mr. Chairman, for keeping this critical markup on the calendar today. I know some people in Washington were calling this weather to be a big snowstorm, but I’m glad we’re here talking about policies that are going to help families and small businesses across the country.
I want to start out by thanking you, Chairman Smith, for your tireless work with Chairman Wyden over the last fourteen months on this bipartisan tax package. You and your staff on the Tax Subcommittee have done a great service for this country, no matter what the Wall Street Journal may have said about this bill.
It shouldn’t surprise anyone on this committee that one of the policies I’m most excited about is research and development expensing, which is a cornerstone of this tax package. I would like to thank my colleague, Mr. Larson of Connecticut, for joining me in sponsoring the R&D expensing legislation for the past few Congresses. Without our partnership, I am sure that this moment would not be possible. Our bill garnered so much bipartisan support, it became the most cosponsored piece of tax legislation in this Congress.
I’ve shared these stats before, but it’s worth talking about them again today.
Our main competitor, China, has seen its R&D investments increase by 400% in just two decades. While the United States’ share of global R&D investments in 2019 dropped to 30%, China’s share grew to 24%, up from 15% in 2009 – a jump of nearly 10 percentage points in 10 years. They achieved this impressive growth by implementing a deduction of up to 200% on eligible R&D investments.
And since amortization took effect, two short years ago, the growth rate of R&D spending has slowed dramatically from 6.6% on average over the previous five years, to less than one half of 1% over the last 12 months.
But this doesn’t just impact the small businesses across the country, it really affects workers as well. As companies spend far less on R&D, the sector is down by more than 14,000 jobs. Three-quarters of research and development spending is on wages and salaries, making R&D amortization primarily a jobs issue.
My home state of Kansas is full of pioneers and innovators – we have a drive to invent and invest in new ideas and new technology. We’re the Air Capital of the World because folks like Lloyd Stearman and Olive Ann Beech found our wide-open spaces and hard-working spirit conducive to advancing air travel. Kansans today are making advancements in health care, agriculture, manufacturing and tech, just to name a few.
It should also be noted that this bill takes a wholistic view of the R&D provision. Under this legislation, we allow businesses that operate in US territories to immediately deduct R&D expenses incurred in those jurisdictions. This is especially important as we continue to push back against the OECD and the ill-conceived Global Minimum Tax.
Correcting this tax code issue is not just about making the tax code fair for innovators, but it’s critical for boosting our economy and making the United States competitive.
Each one of us in this room has constituents in our home districts who will benefit from us passing the Tax Relief for American Families and Workers Act, and specifically the R&D expensing.
I realize some Americans may not be familiar with the nuances of this part of our tax code, but simply put, Republicans and Democrats agree that this is going to boost our economy and our workforce.
I want to again thank Chairman Smith for his work on putting this tax package together. I know in divided government, this can be especially challenging. But consider the fact that one of the key pieces I just discussed was already supported by nearly half of both parties through cosponsorship, it provides a great starting point for us to bring other tax elements together that will benefit families and workers.
It is my hope that this Committee will continue to work together, using this bill as an example of working together in a bipartisan, bicameral manner. I believe that we can do so on the Financing Our Energy Future Act, which I introduced with Mr. Thompson, the Help Independent Tracks Succeed Act, or HITS Act, which I co-lead with Ms. Sanchez, and with pushing back on the OECD’s global minimum tax scheme.
The Tax Relief for American Families and Workers Act is a win for Kansans and all Americans. For example, the Child Tax Credit, which was expanded in the Republican Tax Cuts and Jobs Act, is now fully indexed for inflation thanks to this bill. And we know how bad inflation has been the last three years. I’m so pleased that our work together on R&D expensing is a highlight of this bill, and coupled with other tax provisions, it will benefit the United States economy, small businesses, innovators, families and everyday Americans. I look forward to voting “Yes” on this legislation.
And with that, Mr. Chairman, I yield back the balance of my time.
