Ilitch School accounting team published in taxation journal
Mike Ilitch School of Business Professor of Accounting B. Anthony Billings, Distinguished Service Professor of Business Law and Ethics William H. Volz, Senior Lecturer of Accounting Deborah Jones and Wayne State Ph.D. graduate Buagu N. Musazi had a recent manuscript published in Advances in Taxation.
Advances in Taxation publishes “relevant, quality manuscripts from around the world on any aspect of federal, state, local, or international taxation including tax compliance, tax planning, tax policy issues, and current issues in tax.”
The manuscript, “Why Businesses Locate R&D in High Tax States: The Role of the States’ R&D Tax Credits Effectiveness,” discusses the effectiveness of states’ research and development tax credits.
This study evaluates the effectiveness of states’ research and development (R&D, used to represent creditable research expenses) tax credits. Prior studies report mixed results on the effect of state R&D tax credit incentives. Generally, such studies consider the influence of state R&D tax credits by applying the statutory income tax and R&D credit tax rates. We reexamine the effect of a state’s entire tax burden instead of the statutory tax rates in moderating the effectiveness of a state’s R&D tax credit incentives. After controlling for several non-tax factors, such as the workplace environment, political environment, and workforce education levels in a regression analysis during the 2010-2013 period in 50 states, we find that statewide private-sector R&D spending is a positive function of the R&D tax credit and this effect increases with the overall level of the state tax burden. We attribute this finding to the fact that high tax burdens increase the present value of the R&D tax credits.