Tax credits supporting innovation are about to expire. Texas should extend them
Strong economies are built on investment, and innovation helps drive that investment.
Innovation makes workers more productive and leads to new businesses that pay taxes and create jobs. But while the Lone Star State is renowned for its strong economy, investment in Texas research and development (R&D) remains distressingly low. That limits the growth of future-shaping companies and employers before they can even get started.
With the Texas Legislature now in session, it's vital that legislators take on this issue by extending — and enhancing — the state's innovation investment. One way to do this is through R&D tax credits, which reward companies that invest in Texas R&D by reducing their tax burden.
Texas offered this economic development incentive from 2000 to 2007, then shut it down for seven years. A smaller program started again in 2014, but it will end in 2026 unless the Legislature extends it.
Senate Bill 2206, filed by state Sens. Paul Bettencourt and Joan Huffman, both Republicans from Houston, and HB 4393, by state Rep. Charlie Geren, R-Fort Worth, would extend the program and adjust it so it is easier to administer. Yet even if this important legislation passes, our state's R&D tax credit program will badly trail what is available in other states. Currently, Texas spends less on R&D relative to its population and state output than peer states do.
Our state's tentativeness is surprising, given the clear benefits of R&D tax credits. A study by Rice University's Baker Institute found that a strong R&D tax credit program could boost Texas' economy significantly — increasing the state's economic output by $1.3 billion in five years, $2.4 billion in 10 years, and $4.4 billion in 20 years, and consumer spending by $246 million in five years and $2 billion in 20 years.
Texans would reap the benefits as well. The Baker Institute study shows that R&D tax credits could create nearly 114,000 jobs in the first 10 years. With an average salary of $75,000, that adds up to more than $8.5 billion in wages.
Overall, the study estimates that the total benefits from R&D tax credits would be $14.6 billion after 10 years and $62 billion after 20 years.
By contrast, states that don't invest in R&D see slower economic growth and lower standards of living. While other incentives like property tax breaks are more common, R&D tax credits benefit a wider range of businesses.
These investments also pay for themselves. The Baker Institute study examined a moderately sized R&D tax credit program that would cost $661.4 million in 2025 — and found that it would grow the Texas economy enough to cover this cost.
So, the question isn't whether Texas can afford to extend the R&D tax credit; it's whether Texas can afford not to.
Economic growth is the most important part of a healthy economy. It produces opportunity and improves living standards in each successive generation.
R&D tax credits help deliver that healthy growth. They also allow smaller, non-established businesses to gain a foothold and compete in the marketplace. As those smaller firms succeed, they create new opportunities for others. And, with a healthy ecosystem of innovation investment, there are always new, cutting-edge companies coming into the pipeline.
Texans rightly celebrate our state's economic success over the past several decades. Innovation-focused programs, especially R&D tax credits, can ensure that success continues for future generations.
Extending the current program would help. Expanding it — especially to the point that it's competitive with other states — would ensure that the state will thrive in the future as much as it has in the past.
John W. Diamond directs the Center for Tax and Budget Policy at Rice University's Baker Institute; he was the lead author on the study of the economic effects of R&D tax incentives in Texas. Jennifer Rabb is president of the Texas Taxpayers and Research Association, which represents many of the state's biggest employers.
This article originally appeared on Austin American-Statesman: R&D tax credits fuel innovation. Texas should extend them | Opinion
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Hill
23 minutes ago
- The Hill
Speaker Johnson: Newsom ‘ought to be tarred and feathered'
Speaker Mike Johnson (R-La.) said that California Gov. Gavin Newsom (D) should be 'tarred and feathered' for how he has responded to the violent protests in Los Angeles, while declining to say whether he agreed that the governor should face legal consequences. His comment came in response to a question at a press conference about President Trump endorsing the idea of his border czar Tom Homan coming to arrest Newsom. 'I'm not going to give you legal analysis on whether Gavin Newsom should be arrested, but he ought to be tarred and feathered, I'll say that,' Johnson responded. He went on to criticize Newsom's objection to Trump deploying the National Guard to quell the anti-immigration enforcement protests. Newsom said he is suing the Trump administration, arguing he illegally federalized the National Guard to respond to the protesters. 'He's standing in the way of the administration and the carrying out of federal law. He is applauding the bad guys and standing in the way of the good guys,' Johnson said of Newsom. 'He's a participant, an accomplice, in our federal law enforcement agents being not just disrespected, but assaulted. This is a serious problem.' Johnson said of the lawsuit: 'What a joke. Do your job, man, that's what I tell Gavin Newsom. Do your job. Stop working on your rebranding, and be a governor.' Trump had endorsed the idea of Homan arresting the sitting governor on Monday. 'Gavin Newsom is daring Tom Homan to come and arrest him,' Fox News reporter Peter Doocy asked Trump. 'Should he do it?' Trump responded: 'I would do it if I were Tom.' Newsroom called the comment an 'unmistakable step toward authoritarianism' in response to Trump in a post on X. In Washington, though, Republicans are largely rallying around the administration's actions and confrontation with local Democratic leaders over protest response. Johnson played video of the violence and destruction in pockets of Los Angeles in a closed-door meeting with House Republicans on Tuesday morning, according to a source. White House Press Secretary Karolina Leavitt was a guest speaker at that morning meeting and also pushed the administration's posture on the protest response.
E&E News
37 minutes ago
- E&E News
Democrats scrambling to convince GOP to save green credits
Senate Democrats are ramping up pressure on Republicans to try to protect swaths of their 2022 climate law as the GOP races to advance their party-line megabill. The situation has Democrats trying to influence legislation they have no intention of supporting. Whether they succeed is another question altogether. 'I have been talking nonstop with [Republicans] and companies,' said Senate Finance Committee ranking member Ron Wyden (D-Ore.). 'I believe we are picking up support. … We have a lot of executives weighing in. We have a lot of senators starting to get concerned about the fact energy prices are starting to rise and the consequence of walking away [from clean energy tax credits] will reduce choices and reduce competition.' Advertisement Wyden said he's zeroing in on Southern senators because of the interest in renewable energy sources. Texas, for example, is a leader in renewable energy production. 'They made a lot of headway under the law I wrote in 2022,' Wyden said of renewables, expressing confidence Republicans understood the importance of preserving the 'technology neutral' credits. It's part of an effort by Democrats as they try to find their footing in the current political landscape, balancing fighting President Donald Trump and congressional Republicans on cuts to Medicaid while trying to find common ground elsewhere. There may be an opening. Some Republicans have indicated their discomfort with accelerating the demise of some green energy subsidies, though one Southern Republican vocal about protecting some climate law credits, Sen. Thom Tillis of North Carolina, said Monday he hadn't heard a word from Democrats. The House-passed budget reconciliation bill included a sharp phase down of federal incentives for wind, solar, hydrogen and other energy sources — while sparing biofuels and nuclear power. It also added strict requirements barring companies associated with China from accessing tax credits, a provision which many consider unworkable. Wyden called changing that provision 'hugely important.' In recent weeks, Senate tax writers have been trying to hash out their portion of the legislation, with the self-imposed July 4 deadline fast approaching. The Finance text could be released later this week or early next. That means it's crunch time for Inflation Reduction Act defenders to make their case. Several Senate Democrats told POLITICO's E&E News on Monday they felt encouraged by the conversations they've had in recent weeks. Senate Minority Leader Chuck Schumer (D-N.Y.) planned a breakfast about the topic for Tuesday morning, Punchbowl News reported Monday, saying he's enlisted utility companies in the effort. The outlet said Schumer was focusing on 16 Senate Republicans whose states would be disproportionately targeted if the credits disappeared. 'There's such a vulnerability — the impacts are so deep and devastating — and that's one of the reasons I'm pushing it,' Schumer told the outlet. 'A lot of conversations' Schumer has said he wants to apply pressure to his Republican colleagues, understanding that peeling away just a few votes might sink the whole effort. 'There are a whole number of Republicans, particularly those that have a lot of clean-energy investments in their states, who really didn't like what the House did,' Schumer told POLITICO last month. 'And the question is: Will they be able to put enough pressure on [Majority Leader John] Thune, or even vote [with us] on some amendments?' Michigan Democratic Sen. Elissa Slotkin, who was in the House during the last Congress, said the wooing of Republicans has been front and center. 'We certainly have had a lot of conversations with the auto industry and a lot of conversations with our Republican colleagues who care about the auto industry,' she said Monday. Sen. Brian Schatz (D-Hawaii) also said he was involved in conversations with Republicans. Asked how the conversations were going, he said, 'I don't know yet.' Asked who he was talking to, he said, 'Why would I say that?' Sen. Mark Kelly (D-Ariz.) said he was 'hopeful' about the future of the climate law credits' fate, given Republicans are big believers in producing more energy. 'I don't know what the White House is thinking, but if you kill these tax credits, you are not going to be able to grow the economy the way they want to grow the economy. … You need energy,' he said. 'They seem to understand that part.' 'We're besieged' Utah Sen. John Curtis, who has been among the Republicans pushing for changes, said there's been considerable pressure from industry for about a month. 'I think it's fair to say we're besieged by people wanting to talk to us about the tax credits … more than we can possibly see,' he said. Curtis said he's been hearing from Democrats, too. Tillis was unmoved by any pleas from Democrats. 'I have not heard a bit from them,' he said. 'I don't know why they would think it's relevant. They have no interest in voting with it.' But Tillis did seem to think the utilities would have an interest in weighing in. 'They are in the mix in some of these, too,' he said, specifically pointing to 'investor-owned utilities in particular.' Several groups — including the American Critical Minerals Association, the Battery Materials & Technology Coalition, Clean Energy for America, the Conservative Energy Network, Impact Capital Managers, Securing America's Future Energy and the Solar Energy Industries Association — fired off a new letter to Senate Republicans Monday. SAFE is also running an ad campaign. And even though nuclear and biofuels fared much better in the House bill compared to other energy sources, boosters are pushing for more flexibility. Last week, a group of House Republicans led by Rep. Jen Kiggans (R-Va.) sent a letter to Senate GOP leaders urging them to make major changes to the bill they had voted for. But House GOP hard-liners want the IRA repeals to go even further. A new House Freedom Caucus missive Monday urged the Senate to 'hold the line' on the tax credits. 'The House is very different from the Senate. Senators spend a lot of time talking to their major employers,' Wyden said. 'There was a lot of awareness that we avoided mandates,' Wyden said about the 2022 climate law. 'We created opportunities to encourage innovation. The more you reduce carbon, the bigger your tax savings. We did a lot of groundwork.'
Newsweek
37 minutes ago
- Newsweek
Trump Administration To Give $1,000 Boost to All Newborn Babies
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. President Donald Trump has announced a $1,000 tax-deferred investment account for American babies born during his second term. The president revealed his plans at a roundtable at the White House on Monday, alongside several prominent CEOs, including those of Uber and Goldman Sachs. Newsweek has contacted the White House and the Democratic Party, via email, for comment. Why It Matters The president said these "Trump Accounts" are "fully funded through targeted reforms in the One Big Beautiful Bill," a piece of legislation that has faced much criticism and sparked the now-viral spat with Elon Musk. The broad budget package passed the House by one vote and is now headed to the Senate, where some Republicans have voiced concerns about certain parts of the bill, which the Congressional Budget Office has said will add $2.4 trillion to the U.S. national debt. President Donald Trump speaks during an "Invest in America" roundtable with business leaders at the White House, Monday, June 9, 2025, in Washington. President Donald Trump speaks during an "Invest in America" roundtable with business leaders at the White House, Monday, June 9, 2025, in Washington. AP What To Know The White House said the accounts will "afford a generation of children the chance to experience the miracle of compounded growth and set them on a course for prosperity from the very beginning." Every U.S. citizen born after December 31, 2024, before January 1, 2029, will receive a one-time contribution of $1,000 that will "track the overall stock market," Trump said. The accounts, which will be controlled by guardians, can allow additional private contributions of up to $5,000 annually. "This is a pro-family initiative that will help millions of Americans harness the strength of our economy to lift up the next generation. And they will be getting a big jump on life, especially if we get a little bit lucky with some of the numbers and the economies into the future," Trump said. "In addition to the substantial financial benefits of investing early in life, extensive research shows that children with savings accounts are more likely to graduate high school and college, buy a home, started a business and are less likely to be incarcerated. Trump Accounts will contribute to the lifelong success of millions of newborn babies," he added. The White House has expressed some concern about declining birth rates, with Vice President JD Vance saying on January 24 that he wanted "more babies" to be born in the U.S. In February, Trump signed an executive order expanding access to in vitro fertilization for Americans. And Transport Secretary Sean Duffy directed his department to give funding precedence to "communities with marriage and birth rates higher than the national average." The White House has also explored giving women a "baby bonus" of $5,000 to encourage Americans to have more children, The New York Times reported in April. What People Are Saying House Speaker Mike Johnson said: "It's a bold, transformative policy that gives every eligible American child a financial head start from day one. Republicans are proud to be the party we always have been. It supports life and families, prosperity and opportunity." Goldman Sachs CEO David Solomon: "This initiative gets at the core of binding those future generations to the benefits and the potential of America's great companies and markets. Early childhood investments have far-reaching benefits, and Goldman Sachs is proud to support his initiative ... Our economy's future vitality is dependent on young people understanding the power of investing for the long term." Uber CEO Dara Khosrowshahi: "What if we could give that same powerful, real, tangible hope that comes from having a stake in your own future and a stake in the best companies in the world to every single child that's born in this country? That's the promise of the Invest in America Act. It's not just an account; it's a launchpad. It puts the unstoppable engine of compounding to work for our kids, building a future for them from day one." What Happens Next The bill, which includes the "Trump Accounts" program, is headed to the Senate, where changes are expected as legislators aim for a July 4 deadline. The chamber has a 53-47 Republican majority, so there is only a little room for GOP dissent if the bill is to become law.
