Over the past thirty years, state research and development (R&D) tax credits have become one of the most common state tools to boost their local technology economy. Few studies, however, have attempted to provide a comprehensive evaluation of their effectiveness. In this article, SSTI provides an overview of the literature on state R&D credits, examining why states introduce these incentives and whether or not tax credits are an effective policy tool to promote high-tech businesses and jobs.
The first state R&D tax credits were introduced in the early 1980s. One year after the introduction of the federal Research and Experimentation Tax Credit in 1981, Minnesota passed its own credit, followed by six other states over the next five years. Earlier this year, a review by the Texas Legislative Budget Board reported that 43 states now offer R&D tax incentives.
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