The regulation of fiscal and tax policies is an imperative prerequisite for improving the regional innovation capability. In view of this, an attempt was made to select 31 provinces and cities in China as the research object from 2009 to 2018, to extract the fiscal and tax policy text encouraging innovation of the Chinese provinces and cities based on Python, and analyze their impact on regional innovation capability from both a text data and numerical data perspective. It is noteworthy that most of the provincial fiscal policies just follow the national fiscal policies. Each province does not formulate fiscal and tax policy according to its own unique characteristics. Fiscal policies and regional innovation capability exhibit significant spatial heterogeneity. Based on the results of the dynamic panel data model, it is seen that the R&D input and industrial structure are the main sources of improving innovation capability. The fiscal expenditure for science and technology, fiscal and tax policy text, macro tax burden, business tax (BT), and value-added tax (VAT) have a significant boosting effect on the regional innovation capability. However, the corporate income tax hinders the regional innovation capability. Finally, through the robustness test of invention patents, it is found that the fiscal and tax policy text, macro tax burden, and business tax still have a positive effect on invention patents, but the role of value-added tax has changed from promotion to obstruction, and the corporate income tax has become a significant obstacle on invention patents. This shows that China should build a tax system that promotes fair competition, reduce the tax burden of enterprises, encourage enterprises to conduct independent R&D, and guide enterprises in the evolution from the low-tech to high-tech innovation by improving the tax structure and fiscal technology expenditures.
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