wiping out tax breaks to offset
the lower rates, especially
when you consider that the
largest of them are the mortgage interest deduction, the
charitable deduction, and the
tax exclusion for health care
(without which employees
would have to pay tax on the
value of their health benefits).
These deductions are woven
into the financial fabric of
many, many American lives.
Their extermination is not
Republicans want on their
resumé. In a National Association of Home Builders poll
in January, for example,
77 percent of Republicans
opposed eliminating the
mortgage interest deduction.
Romney has said he would
preserve it for middle-income
families. But that makes the
budgetary math only harder.
A CHANCE TO GET IT RIGHT
Could it be? Yes! A sign that the two parties
retain a memory of how to work together.
Now, Congress: Pass Startup Act 2.0
et aside, if you can, the fear
engendered by discussing
the future of the federal
budget. What can Washington
do about issues of more
specific and short-term concern
to entrepreneurs and potential entrepreneurs?
It can move on Startup Act 2.0, a bipartisan
bill that was introduced in both the House and
the Senate last spring. Startup 2.0 addresses
four crucial issues: talent, ideas, money, and
ease of doing business.
WHERE DO WE
GO FROM HERE?
If all you cared about in next
month’s election was realizing
the entrepreneurs’ agenda,
your best hope would seem
to be a Republican sweep.
Arguably, a Republican
legislature and executive
uninhibited by the need for
Democratic votes is the team
most likely to reduce the
deficit and reform the tax
code in the near future.
But the Republican steam-roller scenario makes some
ambitious assumptions. It
requires that a President Romney and a Republican legislature fractured between Tea
Partiers and traditional politicians be able to deliver a unified vote on tough issues. It
assumes Republicans have the
ability to face down the special
interests that are certain to
1. Deepen the talent pool
First, the Startup Act would bring fresh skills
and entrepreneurial energy into the country
by creating 50,000 green cards for foreign
graduates with advanced science and technology degrees from American universities,
and another 75,000 green cards for immigrants who establish new businesses here
and who meet certain minimum investment
and hiring benchmarks.
More than half of the doctorates earned
in engineering, computer science, and physics at American universities go to foreign
students. We force many of them to leave
the country soon after they graduate. At
the same time, many prospective company
founders are kept out by requirements that
they not do business here after their visas
expire. Amidst 8 percent unemployment
and 15 percent underemployment, we thus
find ourselves in the crazy situation of
actively turning away entrepreneurs who
want to come to the United States and
create companies and jobs.
3. Open the capital spigot
Third, the Startup Act would facilitate
entrepreneurial financing through two
changes in tax law. One change would
make permanent the exemption from
capital-gains taxation for certain equity
investments in small businesses held for
at least five years. Kauffman Foundation
research has shown that this could lead to
an additional $750 million of investment per
year in potential high-growth companies.
A second change would make a limited
research and development tax credit available
to start-ups with less than $5 million in
sales. These provisions, the only measures
in the act that would have any budget
impact, would build on the deregulatory
provisions in the JOBS Act, enacted with a
large bipartisan majority in Congress and
signed into law by President Obama in April.
Once all the rules for implementing the
JOBS Act are written by the SEC, start-ups
and young companies should find it easier
and less costly to raise capital.
2. Set ideas free
Second, the Startup Act would accelerate
the commercialization of university research
by giving grants to universities that permit
their faculty members to directly license their
innovations rather than going through their
university’s technology licensing office. These
reforms, which basically replace monopolies
with market forces at universities, are long
overdue and would help launch more faculty-developed businesses, perhaps many in
conjunction with seasoned entrepreneurs.
4. Get wise about regulation
Finally, the Startup Act would accelerate
long-needed regulatory reform. It would
embed in statute what has been required
by executive order for more than three
decades, a requirement that federal regulatory agencies conduct a cost-benefit analysis
before implementing new “major” rules, and
add a new feature: an assessment of the
effect of these proposed rules on company
creation. And to promote a virtuous cycle of
deregulation at the state level, the Startup
Act would require the Commerce Department to assess the impact of state legal
environments on entrepreneurship.
Startup Act 2.0 would do more to pro-
mote entrepreneurship than anything Con-
gress has done in decades. It’s a good sign
that all the political initiative for the Startup
Act has come from Congress, and in biparti-
san fashion. There is a good chance, and
good reason, that the bill will be at or near
the top of the legislative agenda in the next
Congress, almost regardless of the election
outcome. —Dane Stangler
Dane Stangler is the director of research at the Ewing Marion Kauffman Foundation.