As technological breakthroughs and a renewed focus on American manufacturing increasingly motivate policymakers in Washington, research and development have become a critical concern for businesses striving to lead the nation into global technology dominance. Nvidia, the No. 1 stock and rapidly growing semiconductor company, recently announced a multiyear strategic partnership of $2 billion with Synopsys, an electronic software company, to infuse artificial intelligence into R&D. Depending on where they’re located, such corporations investing in R&D could benefit from a significant tax break — but only in certain states.
At the state level, R&D tax credits typically take the form of a percentage-based, dollar-for-dollar reduction in a company’s tax liability when a significant share of its activity involves qualified research. Allowing research-driven companies to retain more of their earnings means more investment back into innovation, workforce expansion, and new lines of business. These growth-oriented incentives have helped fuel the rise of some of America’s most successful modern companies, including Amazon, Google, General Motors, and leading pharmaceutical firms.
Yet, a surprising number of states still lack R&D tax credits, including West Virginia, Tennessee, Mississippi, Alabama, Oklahoma, and Nevada. For these states, the absence of an R&D credit is more than a missed opportunity for businesses; it’s a competitive disadvantage. Companies deciding where to expand or build new facilities heavily weigh a state’s tax landscape. R&D incentives consistently rank among the most influential factors. When neighboring or peer states offer such credits, those without them risk losing high-paying jobs, investment, and long-term economic growth.
As global competitors ramp up their own innovation incentives, the U.S. cannot afford internal disparities that leave portions of the country lagging behind. States without R&D credits place themselves at the margins of the innovation economy, even as regions that embrace these tools attract new industries, research clusters, and entrepreneurial talent.
WE’RE A NATION OF INNOVATORS, BUT OUR TAX CODE NO LONGER ENCOURAGES IT
Expanding these credits is not simply a matter of helping large corporations. Small and mid-sized businesses — often the source of the most groundbreaking technologies or critical local supply chains — benefit immensely from early-stage tax relief. Local food brands, scientific research labs, and regional oil refineries can reduce their tax liability through these credits.
For a startup deciding whether it can afford another engineer, facility upgrade, or product iteration, an R&D credit can be the difference between accelerating a breakthrough and postponing it indefinitely. If states want to position themselves for future economic dynamism, adopting or strengthening R&D tax credits should be at the top of their agenda. The innovation economy is growing, but only in places prepared to support it.
Sam Raus is the David Boaz resident writing fellow at Young Voices, a political analyst, and a public relations professional. Follow him on X: @SamRaus1.
