February 14, 2013

The Better Angels Of Our Tax Code

As a free-market proponent, I often talk of the wonders of entrepreneurship. Yet, when Missouri tries to encourage entrepreneurship, it seems, more often than not, it goes about it the wrong way.

Case in point: The Missouri Angel Investment Incentive Act, which is aimed at encouraging individuals to provide seed-capital financing to certain Missouri start-up businesses. This encouragement takes the form of a tax credit, with an annual cap of $6 million. Now, as far as tax credits go, encouraging start-ups is not as bad as say, subsidizing wine and grape growers. But this project is just a symptom of the same development mindset that the state has been on for a while.

Considering what Kansas has done in terms of fostering a healthy business environment, and looking at what Nebraska and Louisiana are aiming to do, a tax credit aimed at angel investments is kind of a feeble response.

How about Missouri completely eliminates its tax on business income instead? My colleague Patrick Ishmael and I have illustrated how Missouri could eliminate its corporate income tax by capping and eliminating economic development tax credits. We also have highlighted how Missouri would be better served if the income tax on pass-through entities is eliminated.

Encouraging individuals to invest in start-ups is not the worst way to encourage economic development, but fundamental tax reform will allow all businesses — those just starting and those decades old — to expand and grow. Missouri needs to take bold steps to keep up in the development game. A $6 million tax credit is not the way to go.

A project of the


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