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Education

R&D tax credits provide capital restaurants closing for good. Service-
based sectors like gyms, daycares,
and nail salons also bore the brunt
for innovative companies of the pandemic's economic impact,
while supply chain disruptions and
labor shortages squeezed retail and
By Tyler Kem manufacturing industries.
Strike Tax Advisory The news isn't all bad though. The
decade following the Great Recession
ittle known and underutilized, the research and development (R&D) was notable for its stagnation in start-
tax credit could hold the key to economic recovery in the wake of the
COVID-19 pandemic. For companies who are innovating, applying up growth. New business formations
L for the credit could mean the difference between having the capital simply stalled at levels lower than
to hire more employees versus putting off growth for another year because of pre-2008 amounts, and this contrib-
uted to a slow post-recession recov-
cash flow problems.
ery. But the combination of federal
Despite widespread economic turmoil in 2020, there are promising signs that stimulus money and the American
the American economy is on the upswing. Disruptions in 2020 resulted in entrepreneurial spirit promises to
make 2022 a banner year that turns
an additional 200,000 small businesses closing—a 30 percent increase over a
normal year. In contrast, the U.S. Census Bureau is reporting a record number economic stagnation around.
of new business applications for 2021. As entrepreneurs shift to accommodate A surprising twist
consumers' pandemic preferences, different sectors of the economy are poised in job formation
for innovation.
In Using data from the U.S. Census
American innovation and growth Bureau, Economic Innovation Group
At the onset of the COVID-19 pandemic, industries like restaurants and bars noted in "The Startup Surge: Business
were hit particularly hard by government shutdowns, with around 110,000 Formation in 2021 on Pace to Break
Record" that "In 2020, there was an ex-
plosion in new business applications,
reaching nearly 4.5 million by year's
end—a 24.3 percent increase from
2019 and 51.0 percent higher than the
2010-19 average. Between 2005 and
2019, business applications hovered
around 2.5 million per year and were
roughly evenly split between what
Census calls 'high-propensity busi-
ness applications' and all other busi-
ness applications."

High-propensity businesses are busi-
nesses the Census Bureau said are
more likely to succeed because they're
a corporate entity that has hired em-
ployees, and they exist in the food
service industry, construction, manu-
facturing, retail, professional, science
and technical services or healthcare.
Businesses like these have the poten-
tial to change the face of the economy
going forward.
Investing in American businesses

The rate of failure for new businesses
varies across industries. The National
Restaurant Association said that 30
percent of restaurants fail in the first
year. The Brewers Association re-
ported a failure rate of 48 percent in

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