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StartUp Tax Break: Let's Follow Wisconsin's Lead

March 16th, 2010 | Small Business | No Comments »

Thanks to the fine folks at BusinessWeek, specifically Kay Koplovitz, I was introduced to a concept that should be embraced by Congress if we’re serious about jump-starting the economy — give angel investors a tax credit for investing in startup companies.  This concept just makes sense if you think about a few different points:

1.  Most people work for small businesses — to generate real job growth you’ve got to encourage small business growth.  Incentivizing investment in startups will pull up the slack created by massive job layoffs, and in turn will foster innovation.

2.  It levels the playing field with other investments — The government incentivizes other investments all the time.  If you want to buy a home or second home, you can write off interest expense.  If you invest in publicly traded stock (and lose money) you can take an offset on other gains or your income.  Why not also incentivize investments in the oft overlooked startups?

3.  It already works — as Ms. Koplovitz points out, this concept isn’t new.  In fact, thirty states already have similar programs in place (albeit on a smaller scale).  Seven years ago, Wisconsin started a program that provided angels a tax credit.  Investments in startups have since ballooned from $1.5M to over $15M.  Wisconsin working to expand the program (as it staves off pressures from unemployment and increases business tax revenues).

Thanks to BusinessWeek and Ms. Koplovitz for raising this idea.  Please send along any other small business tax ideas.

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