Abstract: Innovation income is the power source for enterprises to carry out effective innovation. Based on the previous reform practice, this paper studies the innovation income effect and its occurrence mechanism of R&D expense deduction policy. The results show that the R&D expense deduction policy can encourage enterprises to carry out innovation activities, but the innovation income is not obvious. Among them, compared with expanding the scope of policy application and increasing the proportion of the government's sharing of innovation risks, it can not only increase innovation input and innovation output, but also enhance the innovation income of enterprises through the capitalization of innovation input, which deserves more attention. Through further examination, it is found that the quality of innovation rather than the efficiency of market transformation is an important factor restricting the income of enterprise innovation. Therefore, reforming the risk-sharing mechanism, especially strengthening the capitalization of R&D investment, and perfecting the policy system of scientific and technological innovation are important aspects to encourage enterprises to innovate effectively.

Key words: additional deduction, innovation income, quasi natural experiment