Will This Tax Break Stimulate the U.S. Economy?

Companies will be able to breathe easier when they decide to put time and money into researching and designing new products as the U.S. government has extended tax breaks for R&D for another year. The tax breaks help take a little of the risk out of coming up with new products, thus spurring growth and development that could in turn lead to new job creation, a win-win for the economy and corporations alike.

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The U.S. government first introduced the R&D tax break back in 1981, and has maintained it for the long haul. The continued tax break may help boost shares after previous uncertainty over the recently-averted fiscal cliff lowered many companies’ shares. Not only do these tax breaks have a positive effect on the U.S. economy, but having the most advanced technologies and products is important globally, and tax breaks that give incentives to companies for creating those technologies and products can help keep the U.S. from falling behind emerging superpowers like China and Japan.

As worry over the fiscal cliff settles, many will look to see how companies bounce back from the descending share values of the past month. From the decision made Tuesday, companies and consumers will not face the sudden tax hikes they were worried about. If consumers resume worry-free consumption, and investors grow more confident, companies may see even more added benefit from the government’s decision.

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