Five reasons Obama’s economic plan is good for startups

Obama’s economic polices strike me as pro-business, especially small business, and pretty pragmatic. Here are five things I found to like that support tech startups…

Eliminate the capital gains tax for investments made into startups. This rewards higher risk investors that are providing critical capital for the real economic engine of America, where most new jobs are created. This sort of “targeted” tax relief (as opposed to total elimination of capital gains tax) should be measured in the ripple effect (i.e. did it ultimately create more jobs, more companies, more wealth, and smarter tax revenue).

Provide $3,000 tax credit to small businesses that create new jobs in the next two years. What’s most significant is this is applicable to the employer portion of payroll taxes (which is usually the only real tax startups face). My guess is that it also becomes a net gain in overall tax revenues for America, as companies hire more people and have a little tax relief during the formative years.

Provide tax credits to small business to reduce the cost of health care. Absent a comprehensive change in the way health care is paid for in America, the heaviest burden for health care costs is carried by small businesses, many of which can’t afford to provide, and aren’t insulated from wild fluctuations in group costs.

Making the R&D tax credit permanent, and doubling the federal funding for science and technology research over the next ten years.

Invest $250m a year to fund a national network of public-private business incubators to support entrepreneurs during the start-up phase. I think this is a great  initiative as well, but as we’ve seen with the success of Chicago’s TechNexus (now 25 companies are growing there, and there was no public money to support that initiative), it’s critical for the private sector to lead this. Government should encourage business, but not try to lead it. Perhaps that $250m set aside for incubators could best be used as matching grants.

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