Taxes and innovation: shout it from the rooftops

We find that taxes matter for innovation: higher personal and corporate income taxes negatively affect the quantity, quality, and location of inventive activity at the macro and micro levels. At the macro level, cross-state spillovers or business-stealing from one state to another are important, but do not account for all of the effect. Agglomeration effects from local innovation clusters tend to weaken responsiveness to taxation. Corporate inventors respond more strongly to taxes than their non-corporate counterparts.

That is from a new NBER paper by Ufuk Akcigit, John Grigsby, Tom Nicholas, and Stefanie Stantcheva, via Adam Ozimek.

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