Angel investors spur growth

Moderated by Rick Badie

Legislation that would renew Georgia’s angel investors tax credit is under consideration at the Gold Dome. Last week, the state House of Representatives introduced a measure to renew the credit for another five years, a move vital to local start-ups seeking investor money, writes the president of the Technology Association of Georgia. Elsewhere, a policy analyst questions transportation funding as currently outlined in the 2016 state budget.

Angel investors spur start-ups

By Tino Mantella

Each year, the Technology Association of Georgia surveys CEOs, CIOs and other key Georgia decisionmakers from around the state to learn what’s most important to them.

In 2015, more than 300 Georgia leaders responded. A significant majority told us they favored tax incentives and credits to encourage innovative business activity. Incentives based on research and development spending were the most frequently mentioned tax incentives, followed by credits aimed at fostering start-up businesses. Incentives based on hiring, company relocation and investment were also among the top five.

The formation and growth of small businesses are an essential component of our economic engine. Investment in that engine is the fuel that drives the creation of high-paying jobs for Georgia.

The income tax credit is 35 percent of the investment, capped at $50,000. Originally scheduled to sunset in 2013, the Legislature extended the credit to qualifying investments made in 2014 and 2015 so it could study the benefits and use of the credit.

Since the angel investor law took effect in January 2011, 225 qualified businesses have registered with the Georgia Department of Revenue to be eligible for the tax credit. However, individuals are not eligible to claim the tax credit until two years after the investment. Due to this two-year delay, we have data only on the amount for investors pre-approved in 2013 and 2014 for investments made in 2011 and 2012.In 2011, qualified investments totaled $746,014; pre-approved credits, $261,105, and the number of pre-approved taxpayers, 12. In 2012, qualified investment was $2,055,761; pre-approved credit, $694,517, and pre-approved taxpayers, 28.

These numbers indicate that the qualified investment, pre-approved credit and taxpayers pre-approved more than doubled from the previous year. We anticipate this upward trend will continue.

Without the Angel Investor Tax Credit, many start-ups will neither survive nor become eligible for the next phase of venture capital financing. Or, they will find resources outside our state and be forced to move jobs to follow the money. With 80 percent of all new jobs in Georgia coming from small business and entrepreneurial start-ups, this credit is spurring our economy and workforce.

The tax credit has been a great tool for start-ups seeking capital since 2011. The results have been positive thus far, and we anticipate accelerating participation in the future. More investors have jumped in because of the credit, and more young companies are being funded.

Continuing to provide primary sources of funding for these early stage businesses will keep new business and high-paying jobs in Georgia and will generate revenue for the state. The Technology Association of Georgia believes it is fundamentally important that the Legislature extend the Angel Investor Tax Credit during the 2015 legislative session.

Tino Mantella is the president/CEO of the Technology Association of Georgia.

Tax swap no small change

By Alan Essig

Some powerful Georgia lawmakers are floating a plan to move $180 million out of the state account used for schools, public safety and other general needs to redirect the money solely for roads and bridges.

The $180 million may not sound like a lot in the context of the proposed $21.8 billion, 2016 state budget. But consider all the identified needs not included in the spending plan, and you’ll get an idea of just how lean a machine Georgia runs these days. A small sample:

Georgia needs to spend $60 million to return Medicaid payment rates to the level in place until Dec. 31, 2014, or risk jeopardizing access to health care for the poor.

The state also needs to come up with $15 million to launch Invest Georgia, its unfunded venture capital initiative, according to supporters who tout its economic potential.Heck, if Georgia could just come up with $690,000 more in the 2016 budget, the state could add the 11 protective services workers it needs to look after some of the state’s most vulnerable people, rather than postpone those hires a year.

A good case can be made for these and many other worthy requests state lawmakers will consider for the 2016 budget in coming weeks. You can find ardent supporters for all of them.And you can be sure those ardent supporters are just as tired of traveling Georgia’s long-neglected road network as the champions of the plan to shift existing taxes around to create the illusion of $850 million in new annual transportation spending.

This $850 million is found largely through a gradual diversion of about $520 million in sales taxes from cities and counties, which already struggle to cover costs for education and other services once paid for by the state.

Lawmakers who back the plan say they are open to suggestions to improve it. I’m glad that’s the case.

One argument for the plan holds that the money shift aligns the use of the revenue with its supposed purpose. Taxes on gas, they say, are intended to facilitate transportation.

I won’t argue with that reasoning, but it is critical any package that redirects to transportation existing revenue from the state general fund or local governments should also replace that money.

We’ll need bold leaders to sell such a plan to the public, and we can start by admitting two truths: Our hands aren’t tied, and our state budget isn’t full of pork.

Lawmakers can choose from several palatable options to raise new revenue. They could replace the lost state revenue by boosting cigarette taxes. They could extend Georgia’s sales taxes to some household services now exempt as a viable option to compensate local governments.

I wish Georgia could pull a proverbial rabbit out of a hat and create enough new revenue to pay for the state’s needs, from health care to seeding economic development to taking care of our growing older population. Since magic isn’t real, Georgia will need a more pragmatic approach that doesn’t make already scarce resources vanish.

Alan Essig is executive director of the Georgia Budget and Policy Institute.

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