Commentary: Congress should pass tax package that helps businesses

Strengthening our economy is key to securing the future of our nation. With all Texans, including manufacturers, experiencing economic uncertainty like inflation and high interest rates, Congress needs to do its part in shoring up our economic resilience.

That’s why Texas manufacturers called on members of Congress to restore pro-growth research and development tax policies that will support innovation, enable businesses to finance growth quickly and make permanent a key incentive for capital equipment purchases.

Immediate R&D expensing, full capital expensing and an an interest deductibility rule are priorities for American businesses that have now been allowed to expire, resulting in punitive tax bills and higher capital costs. The ability to hire and compensate the manufacturing workforce, as well as to invest in state-of-the-art facilities and equipment, is in serious jeopardy. Washington must take swift action to fully restore these important tax provisions to stop the damage from becoming long-term.

Considering that 75% of all private-sector R&D goes into the manufacturing sector, our state economy has an outsized stake in whether or not immediate R&D expensing is reintroduced by the federal government.

Texas is and has been the No. 1 exporting state for manufactured goods in the nation, setting global standards and maintaining Texas’ status as the 8th largest economy in the world. Employing more than 940,000 hardworking Texans, our manufacturing sector accounts for 11% of the total economic output in the state — $269 billion worth in 2022, to be exact. Texas manufacturers are major U.S. job creators for skilled labor, meaning high-paying jobs go to and remain in Texas. If immediate R&D expensing is restored, we believe that job growth in Texas will remain healthy and will spur further economic growth.

Amortization of R&D expenses, rather than immediate expensing, also damages America’s ability to innovate on a global scale and harms our ability to compete with China. Texas exported $11.5 billion worth of manufactured goods to China in 2022, but China has no restrictions on R&D investment by their government. In fact, the Chinese government is pouring more resources than ever before into innovation, and that means the U.S. and the state of Texas are in danger of losing more high-wage jobs to overseas businesses without Congress’ support.

Staying ahead of China means not just incentivizing job creators for a brief period of time but encouraging and rewarding businesses that invest in innovation to continue their efforts year after year. Economic security for manufacturers is national security, and allowing Texas manufacturers to flourish is a key part of remaining globally competitive.

The momentum for a tax deal between Republicans and Democrats was very promising just before Congress left for the holidays. Congressional negotiations have involved both R&D support and an extension of the child tax credit, which are wins for Texans. Now, The House of Representatives has a bill ready for a full vote: The Tax Relief for Workers and Families Act of 2024. Congress must get to work and pass this bill immediately.

Congress has the ability to ensure the prosperity of Texas manufacturing. With the knowledge of that responsibility, Congress should move quickly to enact sensible tax policies.

Tony Bennett is the president and CEO of the Texas Association of Manufacturers.