Comment by seats | Hacker News Reader

Comment by seats | Hacker News Reader

2 days ago, Startup Act 2.0 was introduced to the house floor (a).

The highlights of the act, which include many of the suggestions in this thread-

1 - Create a new STEM visa so that U.S.-educated foreign students who graduate with a master’s or Ph.D. in science, technology, engineering or mathematics can receive a green card and stay in this country where their talent and ideas can fuel growth and create American jobs.

2 - Establish an Entrepreneur’s Visa for legal immigrants so they can remain in the United States, launch businesses and create jobs, and eliminates the per-country caps for employment-based immigrant visas, which hinders U.S. employers from recruiting the top-tier talent they need to grow.

3 - Make permanent the exemption of capital gains taxes on the sale of startup stock held for at least five years, so investors can provide financial stability at a critical juncture of firm growth.

4 - Create a targeted research and development tax credit for young startups less than five years old and with less than $5 million in annual receipts. This R&D credit is designed to allow startups to offset employee taxes, freeing up resources to help these young companies expand and create jobs.

5 - Use existing federal R&D funding to better support university initiatives designed to bring cutting-edge R&D to the marketplace more quickly, where it can propel economic growth. Require government agencies to conduct a cost-benefit analysis of proposed “major rules” with an economic impact of $100 million or more.

6 - Direct the U.S. Department of Commerce to assess state and local policies that aid in the development of new businesses.

(a) http://polis.house.gov/News/DocumentSingle.aspx?DocumentID=2...

I agree with most of this with the exception of number 3. While taxes can be a large burden on any firm, new or old, if an investor is selling his/her shares, presumably they are cashing out of their company and stuffing it in their personal bank account. Exemption from taxes at that point just seems more like a handout to those who are already successful rather then a real incentive for investment. Am I missing something here?

Remember 'investors' here means VCs not just the founders

You can't go taxing the rich - this is still America

That particular provision is actually just making permanent a temporary exemption that already exists.

The intention is to increase capital available to startups because of the extra tax incentive for investors.

I was aware of that. I don't fully agree with the exemption even as a temporary measure, but I do understand that we are desperately trying to revive our economy and can understand the rationale behind it.

There is a pretty good case to be made that taxing capital gains[1] is not in the long term best interest of the economy. The theory being you want to encourage more investment. The saving to the government by removing its own funding and making it very attractive to invest for private individuals & companies works out better in the long run. The bonus is that keeping politics out of the mix makes for better decision making.

Could a person invest in multiple ventures, reap the rewards, and not pay taxes on a large amount of income. Yes, and it does seem unfair, but people are being employed; businesses are being built; and that money is being spent. We need to think about the overall goals of the system as opposed to "fairness" at each point.

[1] there are many articles - for a math heavy one: http://www.mpls.frb.org/research/qr/qr2331.pdf

I take issue with your use of the phrase 'long term best interest of the economy'.

I would take economic stability over growth any day. It is commonly accepted that taxes prevent the overheating of an economy by absorbing capital that would otherwise be directed towards superfluous investments.

Additionally, taxes are a necessary evil. We need to fund our government and denying that is irresponsible. I would much prefer a government that tries to be fair with it's system of taxation than a government that uses it's taxation system to support the interests of a small minority of the population. (And one could argue that we are already faced with the later of the two situations, at least in the U.S.)

If entrepreneurs and investors are truly the white knights of our economy, then I highly doubt that they really need much help from the government. The only true and reliable path to out-sized wealth is through investment, and that will never change regardless of taxation. I don't blame them for arguing for a system that benefits their bottom line, but one needs to look at the larger social good when making decisions of this sort and come to a solution that balances the interests of all stake holders.

I never said I was against all taxes. The government needs to pay for the services it provides. I do believe the government needs to limit its spending.

I am concerned at what points we tax, and eating the seed corn is not a good thing. We need capital to fund business creation and expansion. Fairness is secondary to people being able to find jobs and having opportunity. Our tax system is so badly screwed up because everyone needs their exception or rule as opposed to looking at where we need to tax and how to make it simple and sustainable.

"I would take economic stability over growth any day. It is commonly accepted that taxes prevent the overheating of an economy by absorbing capital that would otherwise be directed towards superfluous investments."

I would need to see some information on this, as it makes some rather large assumptions about the government's use of the money.

'Commonly accepted' may have been bit of an overstatement on my part. The last place I read about the taxes and overheating thing was in the 'The Affluent Society' written by J. Galbraith. Written in 1958, it was a best seller at the time. The book presents a really good critique about blindly pursuing economic growth.

Generally, I am of the opinion that as we make significant gains and improvements in efficiency, productivity, and technology the number of jobs created for each dollar directed towards investment and business creation will significantly shrink. This will make it difficult to achieve wide-spread prosperity by encouraging investment, as the wealth will increasingly be concentrated at the top (we are already seeing this happen). More likely, we will have to transition to a post-labor economy (there are a few random discussions about this on the internet, but as far as I can tell this is a fairly new idea). Unfortunately for those that lean on the libertarian side, a stable and successful post-labor economy involves high taxes and large social programs (of course this assumes that we can even attempt to make this transition).

Sorry, kinda went off on a tangent, but I think this idea is very relevant to any discussion regarding our approach to economic recovery. It may be a few decades or so before it is relevant, but this transition has been happening for quite some time (when was the last time you withdrew cash from a bank teller, or sent a letter through snail mail, etc).

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