Tax Policy And Administration: Review Of Studies Of The Effectiveness Of The Research Tax Credit
In 1981, Congress created the research tax credit to encourage business to do more research. Since its enactment on a temporary basis in 1981, the credit has been extended six times and modified four times. This report evaluates several recent studies of the effectiveness of the research tax credit to determine whether the studies provide adequate evidence to conclude that each dollar taken of the tax credit stimulates at least $1.00 of research spending in the short run, and about $2.00 of research spending in the long run.
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additional research spending amount of research amount of spending analyzing the credit authors Baily and Lawrence base amount billion cited by KPMG COMPUSTAT data conclude credit stimulated credit's effect data and methodological dollar of additional dollar of forgone dollar of research dollar of revenue dummy variable elasticity estimates estimate of additional Evaluation of Studies Experimentation Tax Credits firm level data forgone revenue Hines incentive provided incremental credit industry level Internal Revenue Service KPMG Peat Marwick Martin Neil Baily methodological limitations methods Peat Marwick report percent price elasticity publicly available data qualified research spending r&d spending recent studies research and development research expenses research spending stimulated research tax credit responsiveness of research responsiveness of spending Robert Z six studies cited spending per dollar spending that exceeds spending to price stimulated per dollar studies we reviewed tax code tax incentives tax liability Tax Policy tax price variable tax return data taxpayer behavior
Page 23 - exceed net income tax minus the greater of (1) the tentative minimum tax or (2) 25 percent of the net regular tax liability above $25,000.
Page 18 - An Analysis of the Effectiveness of the Research and Experimentation Tax Credit in aq Model of Valuation," The Journal of the American Taxation Association, Fall 1991, pp. 1-29.
Page 18 - Explicit and Implicit Tax Effects of the R&D Tax Credit," Journal of Accounting Research, Vol. 31,
Page 18 - Tax Policies for Innovation and Competitiveness." Study commissioned by the Council on Research and Technology, Washington, DC, April 1987.
Page 14 - (202) 512-9044. Sincerely yours, Natwar M. Gandhi Associate Director, Tax Policy and Administration Issues . Contents Letter Appendix I
Page 6 - (1) the total benefits gained by society from research stimulated by the credit and (2) the estimated costs to society resulting from the collection of taxes required to fund the credit The social
Page 5 - disclosure to certain federal officers and employees for purposes of tax administration.
Page 10 - The Effectiveness of Research and Experimentation Tax Credits, Office of Technology Assessment,