Tax Reform Is Good for the Environment
In a new policy study, R Street Resident Senior Fellow of Energy and Environmental Policy Philip Rossetti examines how tax policy incentivizes the private sector to invest in innovation in the United States.
“The tax reform is the most probable reason for a significant increase in private sector energy and environmental R&D, as demonstrated by a $3.3 billion increase in energy and environmental innovation investment in 2018. Overall, private sector energy and environmental R&D outweighs publicly funded energy and environmental R&D by a factor of over seven to one, so policies that result in even modest increases in privately funded innovation can increase net economy-wide investments at greater volumes than public spending,” said Rossetti.
There is not enough data to say how big of an impact specific pieces of the tax reform had on private-sector innovation. However, the fact that there was a notable response to the tax reform means that policymakers should be cautious when considering paying for energy or environmental priorities with corporate rate increases or other taxes on capital investment as those changes may be counter-productive to overall energy and environmental investment and innovation.
Read the full policy study here.