Could the Fiscal Cliff Hurt Information Technology?

Small and medium IT firms could be in danger of seeing a number of tax credits go away if automatic increases aren't avoided, according to a CompTIA study.

A number of industries could feel the negative effects of the “fiscal cliff,” but the IT sector might feel it a little more than most.

That’s because the $955 billion field, which has received a number of tax credits in the past for such things as research and development, could see those tax breaks go away, according to a CompTIA sudy on the matter.

The company released a white paper [PDF] on potential effects on Wednesday. Highlights:

Research cuts: The most notable tax cut expiration that the study cites is the research and experimentation tax credit, which helps companies that invest in innovation and technology. “As a country, we must continue to improve existing technologies and invent new technologies that support our economy and workforce; this is even more critical to our technology workforce,” the white paper states.

Small-business cuts: A key small-business tax write-off, which allows companies to expense assets during the year of purchase — and CompTIA says greatly benefit IT firms — would decline in size from $139,000 to $25,000 as a result of the cuts’ expiration. The white paper recommends keeping the number at 2012 levels to allow small businesses “to invest and grow.”

Where effects can be felt: In a press release, the group cites the U.S. government as a major purchaser of IT technology and notes that the cuts’ expiration would likely have a ripple effect on small businesses. On top of this, the group raises concerns about the effects on education for IT professionals: “Policies and programs that expand life-long education in computer sciences and basic IT skills – as well as policies and programs that lead to meaningful careers in IT – are desperately needed if the United States is to spur job growth, promote innovation, and compete globally,” the white paper says.

How to fix the issue? In a recent CompTIA study, 65 percent of those polled supported a mixture of tax increases and spending cuts to handle the fiscal cliff, with 26 percent favoring an even split, 23 percent favoring mostly spending cuts, and 16 percent mostly favoring revenue increases.

What sort of dangers do you see for your industry if the fiscal cliff isn’t resolved?


Ernie Smith

By Ernie Smith

Ernie Smith is a former senior editor for Associations Now. MORE

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