Empirics prove – tax cuts increase capital investment, R&D, and promote high quality, skilled research.
McCombs 23[Texas McCombs business research, and ideas from the McCombs School of Business at The University of Texas at Austin – based on the research of Lisa De Simone; “Tax Breaks for Innovation Pay Off”; May 30, 2023; https://medium.com/texas-mccombs/tax-breaks-for-innovation-pay-off-2f543f851a6a]//araghvn
Innovation-related tax cuts had several impacts, according to De Simone’s findings:
Increased Asset Investment. Countries reducing tax rates for innovative activities saw 2.6% higher levels of capital expenditures, including assets such as factories and machinery, relative to similar countries offering no tax incentive. But a significant rate cut — 60% or more — was needed to show results.
“You can’t just discount your rate a little bit if you want to attract the types of investment and employment that you’re trying to attract. You have to offer a pretty big benefit to see an effect,” De Simone says.
Higher Pay for Some. The study found no bump in hiring or overall compensation from innovation box policies. But it found increased average pay for employees, probably including higher-skilled research and development workers. Workers earned at least 46,844 euros more, equal to $49,525 in U.S. dollars.