Study on the Impact of Tax Competition on Urban Innovation: Based on the Mediating Effect of Fiscal Science and Technology Expenditure

Under the Chinese-style fiscal decentralization system, local government tax competition is an important factor affecting urban innovation. This study selects 293 prefecture-level cities in China from 2000 to 2024 and establishes a two-way fixed effects model to systematically examine the effect of tax competition on urban innovation, and conducts robustness tests and heterogeneity analysis. At the same time, this study further includes the intensity of local fiscal science and technology expenditure as a mediating variable in the analytical framework to explore the influence path. The results show that local tax competition improves the level of urban innovation, passes a series of robustness tests, and has heterogeneous effects, with the strongest effect in central China and the weakest effect in eastern China. Fiscal science and technology expenditure plays a mediating role. Based on the research conclusions, this study proposes suggestions such as improving top-level design, implementing regionalized fiscal and tax policies, and improving the fiscal science and technology investment support system.