President George W. Bush released his budget proposal last month and it contained both good news and bad news for the laser industry and other high-technology concerns. The good news: President Bush wants to make permanent a tax credit for a company's expenditures in research and development. The bad news: He wants to put the Advanced Technology Program on hold.
The research and experimentation tax credit is quite popular with technology-intensive companies such as laser and optoelectronics firms. The tax credit has been popular in Washington, too. But the tax credit has never been permanent. Instead, for years, the credit has been extended for a few years at a time. Industry officials—and many in Washington—say that such impermanence reduces the credit's effectiveness because company officials can't plan on the credit being available to them in the future. The Laser and Electro-Optics Manufacturers' Association (LEOMA; Pacific, CA) has endorsed making the tax credit permanent.
The tax credit was last extended in late 1999, through June 30, 2004. Bush would make the tax credit permanent—a change never championed by his predecessor, Bill Clinton, presumably because a permanent tax credit would have cost the government more lost income.
"This credit supports the type of technological developments that have fueled the recent boom in productivity growth," the Bush administration argues in its budget blueprint. "By making the credit permanent, the President will give firms the incentive to undertake long-term research projects that could well provide the next round of technological breakthroughs for future generations."
The Bush administration estimates that making the tax credit permanent would cost the government $9.9 billion in lost revenues from 2002 to 2006 and an additional $39.7 billion in the five years after that.
By comparison, many of Bush's other tax proposals cost much more. For example, reducing individual income tax rates is projected to cost $500 billion from 2002 to 2011, creating a new tax bracket for low-income individuals would cost $311 billion, and phasing out the estate tax would cost $267 billion.
The tax credit's relatively low cost seems to bode well for it in the upcoming debates over Bush's tax proposals. Equally important may be the fact that, in the past, some Democrats have vociferously supported making the tax credit permanent.
Bush's initial budget documents were very sketchy in most details, leaving in question the fate of many laser-related government projects and initiatives. For example, the budget proposal vows to strengthen the Energy Department's Stockpile Stewardship program. However, the document gives no hint of the fate of the National Ignition Facility—a laser installation being built at the Lawrence Livermore National Laboratory (Livermore, CA) which is a key part of the stockpile program.
Similarly, the Bush budget proposal promises "a $2.6 billion initiative in research and development for missile defense alternatives and new technologies to support the transformation of US military capabilities," but it was not immediately apparent to what extent that initiative would include laser weapons and systems.
Many of those details are expected to surface sometime in April, when Bush will submit more budget materials to Congress. The new fiscal year starts Oct. 1.
But it is already clear that the Advanced Technology Program's days are numbered. The program, administered by the Commerce Department's National Institute of Standards and Technology (Gaithersburg, MD), has provided grants to companies to develop technologies that had commercial potential but were too immature to attract private investments. Grants were made by the ATP in many areas, including fields related to lasers and optoelectronics, and LEOMA has called for the program's continuation.
Nevertheless, the ATP was a constant source of friction between Clinton and Republicans on Capitol Hill, who saw it as governmental meddling in the private sector. Repeatedly, Republicans tried to cancel the ATP or drastically slash its funding, only to be outmaneuvered by Clinton. In 2001, the program has a budget of $145 million.
But Bush's budget proposal includes no new funds for ATP and instead promises to conduct "a reevaluation of this program." No more new ATP awards would be made by NIST, and it would honor existing awards using ATP funds left over from the 2001 fiscal year.
Although Bush calls for reevaluating ATP rather than immediately canceling it, one hint as to the reevaluation's likely conclusions may be contained in the title of the section of Bush's budget proposal that discusses ATP: "Reducing corporate subsidies." If that perspective is the starting point for the reevaluation, ATP is probably history.
Vincent Kiernan | Washington Editor
Vincent Kiernan was Washington Editor for Laser Focus World.