One Hundred Days of Job Growth

Yet, government “stimulus” programs spend more resources attempting to promote bank lending (more of a benefit to existing business) than spurring private investment in risk-taking and entrepreneurialism.

Tactically, our tax policies need to do more today (and certainly beyond this coming Jan. 1) to incentivize angel investors to fund early-stage ventures than presently contemplated by our legislative class.

To its credit, Obama’s Small Business Jobs Act provided investors considering a qualifying venture investment with a significant opportunity as the result of the full 100% capital gains tax moratorium which also excluded 100% of the capital gains from alternative minimum tax (AMT) considerations.

Alas, the three-month window was unconscionable. Moreover, the Act included such archaic prescriptions as a five-year minimum required holding period; requirements that the business be a C-corporation; a greater of 10 times or $10 million cap; and, unnecessarily excluded certain labor-needy business categories such as hotels and restaurants.

In short, the disappearing Jobs Act mirrored the myriad of noncommittal, ill-conceived and insincere initiatives of prior administrations.

Rather, tax policy designed to promote private investment in startups to stimulate job creation and the economy must be meaningful and immutable to the estimated 225,000 angel investors.  

During the economic downturn in the mid-1990s entrepreneurs created 3.8 million new jobs. To encourage more risk-taking by entrepreneurs and to stimulate more individuals to invest in early-stage private ventures, I would propose that;

• There be no capital gains taxes on investments in early-stage, pre-revenue companies—to encourage more early-stage private investment.
• Shares of common stock issued to founders and key employees of early-stage companies should be exempt from capital gains taxation—to reward entrepreneurs for their risk-taking and create the currency (stock options) that would encourage entrepreneurial activity.
• Investors who contribute the first $5 million of equity financing to any new company should get a dollar-for-dollar tax deduction for the year the investment was made—that critical first $5 million is the hardest for any new company to raise.
• Assuming appropriate disclosure of all of the risks entailed, any investor regardless of their income should be eligible to invest in private ventures—our current securities laws are restrictive and discriminatory.

For these policies to effectively  stimulate sustainable job creation they need to be enacted permanently so that entrepreneurship is embraced by the best and the brightest.