Should Venture Capital Be Encouraged With Tax Breaks?

Venture capitalists should be offered a venture capital tax break. Tax breaks are a way to encourage additional sources of funding for businesses and entrepreneurs. This can provide a way to increase economic development, particularly in areas that are underdeveloped or facing an economic downturn, create jobs and increase other forms of tax revenues. The use of tax incentives to spur economic growth and investment may be a boon for a local or regional economy that is ailing.

State Tax Incentives for Businesses

Many states provide some incentives and tax breaks to large business in order for them relocate or build new plants and operations within their borders. These states understand the importance of spurring economic opportunities, which in turn results in the expansion of the state’s tax base. This same principle can be applied to venture capitalists who spur growth among small business owners and entrepreneurs that are looking ways to bring new products and ideals to the market and create wealth for a community.

Creating Tax Incentives

The federal government and the states can work together to provide new tax incentives for venture capitalists that are tied specifically to economic development in underserved communities. This can include tax credits for the investment in business incubators that house entrepreneurs and business start-ups, as well as an elimination of taxes that are tied with gains made on investment capital that is used to create jobs and build new businesses. These ideals may reduce a visible tax revenue source but create a new one through the increased economic activity that may result.

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