We examine staggered changes in state-level corporate tax rates to show that an increase in taxes reduces future innovation. To sharpen our analysis, we exploit a novel dataset containing information on the geography of ﬁrms’ operations, and document that the effect is stronger among ﬁrms that have a higher proportion of operations in states that pass tax changes, and those that are located in states with laws that make shifting proﬁts out of the state for tax reasons more difficult. Finally, we address concerns regarding endogeneity of tax changes by using instruments based on state legislative rules concerning tax increases.
Do Corporate Taxes Hinder Innovation?
Submitted by Staff on February 02, 2015
|Date: June 22, 2014|
|Author(s): Abhiroop Mukherjee, Manpreet Singh, Alminas Zaldokas|
|Affiliation: Hong Kong University of Science & Technology|