No Taxes, More Growth

A new report released by the Kauffman Foundation claims that a permanent capital gains tax exemption on investment in startup companies could spur at least $750 million in additional seed investment in these job-creating businesses each year. Study authors Robert Litan and Alicia Robb argue that this investment would help high-potential companies cross the so-called “Valley of Death,” enabling them to make a successful transition from the concept phase to an operating enterprise.

According to Robb, companies five years old or younger “accounted for virtually all net job growth from the late 1970s until the Great Recession.” A permanent capital gains tax exemption for investment in these firms “would channel substantially more investment in startups” and “lead to the launch of more high-growth firms and boost the odds that they will reach the growth phase and create jobs that will support economic recovery.”