Executive summary: Reducing marginal individual and corporate tax rates has a significant positive impact on innovation and patenting, with a one percent decrease in tax rates leading to around a two percent increase in patents and inventors. This suggests lowering taxes could be an effective policy lever for promoting technological progress.
Key points:
A study found large effects of tax rates on innovation, with a one percent increase in individual income tax rates decreasing patents and inventors by around 2%, and corporate tax rates having an even larger effect.
These results hold across multiple econometric methods and account for potential sources of bias like reverse causality and state-level differences.
The effects of individual income taxes are mostly from reduced innovative output, while corporate tax effects also stem from businesses relocating R&D activity.
Back-of-the-envelope calculations suggest the cost per patent induced by lowering taxes is similar to the cost through direct R&D spending.
Reducing taxes has benefits beyond innovation in promoting economic growth and allowing inventors to capture more surplus value from their ideas.
The author argues for prioritizing tax cuts, alongside R&D funding, as a relatively simple and efficient way to accelerate technological progress.
This comment was auto-generated by the EA Forum Team. Feel free to point out issues with this summary by replying to the comment, andcontact us if you have feedback.
Executive summary: Reducing marginal individual and corporate tax rates has a significant positive impact on innovation and patenting, with a one percent decrease in tax rates leading to around a two percent increase in patents and inventors. This suggests lowering taxes could be an effective policy lever for promoting technological progress.
Key points:
A study found large effects of tax rates on innovation, with a one percent increase in individual income tax rates decreasing patents and inventors by around 2%, and corporate tax rates having an even larger effect.
These results hold across multiple econometric methods and account for potential sources of bias like reverse causality and state-level differences.
The effects of individual income taxes are mostly from reduced innovative output, while corporate tax effects also stem from businesses relocating R&D activity.
Back-of-the-envelope calculations suggest the cost per patent induced by lowering taxes is similar to the cost through direct R&D spending.
Reducing taxes has benefits beyond innovation in promoting economic growth and allowing inventors to capture more surplus value from their ideas.
The author argues for prioritizing tax cuts, alongside R&D funding, as a relatively simple and efficient way to accelerate technological progress.
This comment was auto-generated by the EA Forum Team. Feel free to point out issues with this summary by replying to the comment, and contact us if you have feedback.