Want US Semiconductor Leadership? Fix the Tax Code

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Recent events starkly highlighted the importance of semiconductors to the US economy and the fragility of the US semiconductor supply chain. These shortages were estimated to have cost over a full percentage point of 2021 US GDP, prompting Congress to pass the 2022 CHIPS and Science Act to level the playing field for onshore semiconductor manufacturing after decades of decline.

However, unrelated tax code changes are threatening to unravel any benefit from the CHIPS Act. New 2022 regulations that disallow the same-year expensing of investments in research and development (R&D) have perversely made the already-uncompetitive US tax code even more punitive to innovation. These disincentives to R&D risk harming US competitiveness across all high-tech fields, including those sectors where the US currently leads.


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