R&D tax credits bring promise of sustainable growth

Alaska’s economy is often likened to a three-legged stool. For decades, the petroleum industry, federal government spending, and the combined economic boost of all other basic sectors have essentially supported the state’s economy.

In recent years, we have seen those legs become a bit wobbly. Government spending is way down, relative to what it used to be, and it is clear the days of federal largesse are behind us. While revenue from the extraction and sale of our oil and gas resources has remained mostly stable, production is on a steady downward trajectory.

For these reasons, it is more important than ever for the state to shore up its foundations by diversifying its economy and strengthening its existing economic sectors.

Economic diversification, however, does not happen in a vacuum. It requires an atmosphere conducive to innovation, which can be an expensive, intricate and time-intensive enterprise. Innovation also can spark a chain of investments in capital equipment, workers and spillover activities in every economic sector.

So, Alaskans should be encouraged by the news that the state House on Friday approved legislation that would establish a tax credit for home-grown research and development. House Bill 118, now on its way to the Senate for consideration, is part of a suite of economic development legislation proposed by Gov. Sean Parnell. The bill offers a 20 percent tax credit on qualified research and development expenditures.

Its purpose is to incentivize companies to conduct independent research and development activities that will, in turn, stimulate private-sector investment, entrepreneurial activity, and business expansion in Alaska. These are things that bring jobs and economic opportunity to Alaskans, while providing sustainable long-term benefits to our economy.

Alaska is already poised to be a leader in cold climate housing research and the processing of in-demand rare earth minerals. The potential in other areas is staggering.

For example, the state sits on more than 50 percent of all U.S. coal reserves. Meanwhile, promising cutting-edge technologies for cleaning coal and increasing its efficiency are being fine-tuned and deployed in China and elsewhere overseas. Imagine the potential for jobs, clean, affordable energy and expansion of Alaska’s economic base if those technologies could be developed further here?

This is the kind of potential HB 118 holds. We hope the Senate sees the same value in the legislation that the House did and gives it speedy approval.

How the Mat-Su delegation voted:

• Rep. Eric Feige, yes

• Rep. Carl Gatto, not present

• Rep. Wes Keller, yes

• Rep. Mark Neuman, not present

• Rep. Bill Stoltze, yes