Incentive to Produce
This sort of thing shouldn’t be anywhere near the chopping block:
Investors in six start-ups are getting a lucrative reward for betting on local entrepreneurs, part of a new and costly state effort to grow local companies.
Last night, the state Economic Development Corporation approved the first applications for the Innovation Tax Credit. The companies may now offer investors a credit of up to $100,000 off their individual state income-tax bill in return for their investments. …
But it is being unveiled at a time of alarming fiscal challenges for the state, as the legislature struggles to close a projected $450-million budget deficit.
Those strains have prompted cuts in public spending, including the recent layoff of more than 100 state workers and sharp reductions in support for social-service agencies.
The imbalance has provoked demands from advocates for the poor that many state tax credits, such as those given to the film industry and developers renovating historic buildings, be scaled back or eliminated. …
Participating companies can receive a maximum of $100,000 in tax credits to bestow on investors, distribute to employees or hand over to a new executive as a signing bonus. (The credits can be shared by up to 10 individuals. Unlike other state programs, they cannot be sold.)
The program offers investors a 50-percent credit on their investment. For example, an investor who puts $100,000 into one of the companies could end up paying $50,000 less on his state income tax bill.
The six applicants approved last night received $100,000 apiece in credits. Under the 2006 law, the EDC can dole out $2 million every two years, leaving another $1.4 million available this period. The legislation expires in 2016.
Add some strings, if you want. Require, for example, a time commitment to the state. Heck, require some percentage of residency. But these back-door balms are crucial to take the sting out of Rhode Island’s otherwise unattractive business climate and local infrastructure.