Milt Capps who published Venture Nashville Connections contacted me the other day to see what I thought of a bill here in Tennessee that would create tax credits for angel investors.
Here is what I told him:
Targeted tax credits for angel investments do little to spur new investments or to increase the overall activity level of angel investing over the long term. They do give angels a tax break, which is not a bad thing, but spurring entrepreneurship in our economy will come from more broad-based tax cuts that leave money in the bank accounts of customers. Recent surveys of entrepreneurs suggest that what they need most to begin growing their businesses again is improved revenues coming from consumer spending, not more access to capital. This is a well intentioned bill, but not one that will have much of an impact on economic growth in Tennessee.
Others disagree with my view. You can see arguments for, against, and some general cautionary comments at Capps’ post on the angel tax credit bill.