Tax Policy and Innovation

Abstract
Tax policy should be formulated with recognition of its effects on research and development and innovation. Many changes in tax policy designed to stimulate innovation have been proposed in recent years. Some of these changes were embodied in the 1981 tax bill. Basic economic analysis and rudimentary statistics enable economists to make some useful statements about the effects of recent and proposed tax changes but, because practically no studies have been conducted in this area, there is little or no dependable information concerning the quantitative impact of particular changes of this sort on the rate of innovation.

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