Department of Economics

With corporate income tax breaks and excise taxation consistently being used as

methods of influencing company behavior, there has always been a desire to measure the size

of the effect taxation has on corporate behavior. In this paper, I examine the effects of a change

in research and development (R&D) tax policy on firm innovation, as measured by the quantity

of US patent applications filed annually. Using a combination of panel data and linear

regressions with year and company fixed effects, I look at the major differences in US patent

application filings before and after the addition of the Alternative Simplified Credit (ASC) in

2009. The findings suggest that there is a positive effect of the ASC on patent applications,

though it is quite negligible. Additionally, it appears that the effects of the ASC are negatively

correlated with the size of the firm, but at an insignificant level.