As states jockey to attract and keep business, the cookie cutter public policy as lobbied for by the National Association of Seed and Venture Funds (NASVF) has come to Minnesota. Over 29 states adopted their version of The Angel Investor Tax Credit legislation, with some establishing their policy as early as 2004.
Minnesota’s massive state deficit and staggering unemployment has pressed legislators to “spur” job growth in any way; hence, the passing of a bipartisan Minnesota Jobs Creation Bill. This bill includes angel investor tax credits (redistributed revenue by government to targeted industries.) In today’s economy, it is extremely difficult for ALL businesses to find the capital necessary to start and expand. So, why would Minnesota choose this legislation over other job growth efforts? Is it because the bill was already written, offering politicians of failing states a thoughtless and quick answer to the problems they created?
It is important to know why our desperate politicians find this legislation so attractive. Maybe it’s because they like to hold power over our private sector, actively engineering the state’s economy through tax credits, instead of lowering taxes for all and allowing the free market to drive sustainable jobs through natural market forces? The only caveat, government doesn’t create jobs; it is a redistributing organ that may “create” short lived jobs in one industry, while its same effort destroys sustainable job creation in the areas it doesn’t favor. There are no real positive gains.
Yes, angel investors can fill a critical role in financing. For some states who have adopted it, this type of tax credit serves as a targeted approach to encouraging entrepreneurial activity by reducing the risks and cost to the angel investors. It allows states to address an economic development goal of diversifying their domestic industry. This is the case in Michigan where their economy is dominated by the automotive industry; however, this is not Minnesota’s approach. Our tax credits are targeted to government favorites: University of Minnesota, green jobs, medical devices and bioscience industries, and nanotechnology; Industries that already fare well in Minnesota. Interestingly enough, the other states choosing the Angel Investor Tax Credit legislation are also targeting these industries-all of them!
Minnesota could best compete with any state if we realized a broad tax cut and reduced the strangling regulation for all businesses. Our legislators should strive to create a business friendly environment not just for a few industries, but for all business. This would strengthen the richness of job choice and security, allowing Minnesotans to self-determined prosperity.
So the deeper question remains: In what direction does this legislation take our state’s economy and how may it distort our marketplace? Our shortsighted legislators don’t care to answer this tough question but instead continue the destructive path of raising taxes and doling out lobbyist driven tax credits under tight government control; they want to say who works and who doesn’t. This kind of economic policy sees the common man as the masses, not as individuals who have his or her own hopes, dreams and plans in earning a living.
In theory it seems easy to get behind this tax credit, but don’t get trapped in their thinking. We need to delve deeper into our market problems and say this “easy vote” generates false hope and more problems for Minnesotans, our state economy and our future.