Intangible assets, such as patents and research and development spending, represent an increasingly large fraction of investment in the economy. In this paper, we review the historic tax treatment of research and development and intangibles in the US and their economic significance. We update Tax Policy Center effective tax rate models by incorporating the capitalization of research and development, the research and experimentation tax credit, and the foreign-derived intangible income deduction. We show how these policies impact effective average and marginal tax rates and shape investment incentives for intangibles.

This report was previously published as a working paper in May 2023.