abstract: Research and Development (R&D) tax credits are one of the most widely adopted policies state governments use to incentivize R&D spending by firms operating in a state. R&D spending is associated with increases in firm productivity, innovation, and higher wages. However, most studies into these tax credits examine only the effect the credit has on firm-based R&D spending and assume the increases in R&D spending mean states are receiving the social and economic benefits endogenous growth theory predicts. This dissertation connects R&D tax credits with the expected outcomes of R&D spending increases to evaluate the efficacy of the tax credits. Specifically, the dissertation connects R&D tax credits to the movement of researchers between states, innovative activity, and state fiscal health. The study uses a panel of U.S. PhD graduates and a fixed-effects linear probability model to show R&D tax credits have a small but statistically significant impact on PhDs moving to states that have the tax credit. Using a structural equation model and a latent innovation variable, the dissertation shows R&D tax credits have a small but significant impact on innovative activity mediated by R&D spending. Finally, the dissertation examines the effect of R&D tax credits on a state’s short- and long-run fiscal health by using a distributed lag model to illustrate R&D tax credits are associated with decreases with fiscal health. / Dissertation/Thesis / Doctoral Dissertation Public Administration and Policy 2020

Although much research on corporate dividend policy exists, the evidence is far from conclusive. Understanding how dividend taxes affect firm-level decisions is crucial to evaluating dividend imputation credits which provide shareholder-level tax credits for dividends received or decreased shareholder-level dividend tax rates, which reduce the double taxation of dividends. Using changes in New Zealand and Australia’s tax regimes, this dissertation provides new evidence on the relationship between tax incentives for R&D investment and dividend payment. The results show that the theory that the tension between R&D investment and dividend payment decreases when a country previously not offering tax incentives for R&D investment or dividend payout, implements one, does not hold using New Zealand firms. Further, New Zealand dividend-paying firms with higher marginal tax rates behave in the manner predicted for firms moving from a tax regime offering a tax incentive for R&D investment to a tax regime offering tax incentives for both R&D investment and dividend payment. The results using Australian data, demonstrate that that the tension between R&D investment and dividend payment increases when a country previously offering only a tax incentives for R&D investment, offers one for both R&D investment and dividend payment. This result is driven by firms with high marginal tax rates. These findings demonstrate that the relationship between tax incentives for R&D investment and dividend payment varies according to firm marginal tax rates and typical dividend payment policies. It also reiterates the importance of considering firms’ abilities to use R&D tax incentives, via their marginal tax rates, when contemplating the effects a shareholder-level dividend tax decrease will have on R&D investment. This dissertation also provides new insight into the corporate dividend policy views. The results support the double taxation and tax irrelevance views in dividend-paying firms operating in a tax regime with dividend imputation and capital gains taxes. By documenting a significant decrease in R&D investment after a change in dividend taxes, this dissertation also highlights a void in the current corporate dividend policy views and shows the need for the inclusion of R&D investment.