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Why Are Some States More Generous in Offering R&D Tax Credits than Others? An Empirical Answer

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  • Jungbu Kim

Abstract

This article examines political cost factors that affect a state's propensity to adopt a corporate income tax credit to encourage research and development (R&D) activities in the United States. Assuming state elected officials are vote-maximizers, this article hypothesizes that politicians' consideration of potential revenue losses and influence from organized interests are critical in a state's decision to provide a R&D tax credit. To test the hypothesis, two statistical models are specified. With a dichotomous dependent variable of whether or not a R&D tax credit is offered, a Logit regression model is utilized. For the interval level dependent variable of effective R&D credit rates, this article specifies a Tobit model. The results show that politicians' concerns about revenue losses loom much larger than private organized interests.

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  • Jungbu Kim, 2010. "Why Are Some States More Generous in Offering R&D Tax Credits than Others? An Empirical Answer," International Journal of Public Administration, Taylor & Francis Journals, vol. 33(7), pages 371-378.
    • Handle: RePEc:taf:lpadxx:v:33:y:2010:i:7:p:371-378
    DOI: 10.1080/01900691003696502
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    Cited by:

    1. Andrew C. Chang, 2014. "Tax Policy Endogeneity: Evidence from R&D Tax Credits," Finance and Economics Discussion Series 2014-101, Board of Governors of the Federal Reserve System (U.S.).

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