Research and development (R&D) activities of private businesses, universities, and the government are important for increasing innovation. Sustained increases in economic growth and the standard of living have been driven by technological innovation, which is why the R&D tax credits and expensing of R&D have been important areas of economic research at the state and federal levels. Texas has underperformed in generating R&D expenditures in relation to other economic characteristics of the state. The major reason for the lack of R&D expenditures is almost certainly related to inefficient and ineffective tax policy in regards to innovation for a substantial part of the last two decades. During this period, Texas enacted incentives into law from 2000 to 2007 and from 2014 to 2026 but the magnitude, structure and temporary nature of the incentives are all potential reasons for the underperformance in R&D expenditures relative to other states.
In 2023, Texas ranked …