Barca: Expand angel tax credits to boost state economy
By Brian E. Clark
Wisconsin’s angel investment tax program should be expanded even more to stimulate nascent businesses and lure young, high-growth companies from other states.
That’s the sentiment of Rep. Peter Barca, D-Kenosha, who recently introduced legislation that would grant tax credits to companies three months before they move to Wisconsin.
To stimulate more economic growth, he also wants to create a capital gains tax exclusion of 60 percent for assets held longer than five years. He says the proposal would create a two-tiered structure that would help to encourage businesses to make long-term investments in the state.
WisBusiness audioThe state currently provides a 30 percent exemption for assets held at least one year. He says the proposal would be good for the state because many communities are seeking investment.
“This is all about creating jobs, as it should be,” said Barca, a former congressman and head of the Midwest Small Business Administration under President Clinton.
Come this fall, he says legislative and gubernatorial races will be decided in large part by who voters who want their elected officials to restore Wisconsin’s lagging economy. Other issues, he says, will play second fiddle.
Barca said expanding angel investment credits “was one of the most important steps we took during the budget. It increased the incentive for people to make investments (in start-ups) from 12.5 percent to 25 percent.”
Then, to make more capital available, Gov. Jim Doyle and the Legislature tripled the amount of money available for investors seeking credits, increasing the amount to $37 million each year. In addition, Wisconsin raised the cap on eligible angel investments to $4 million.
“This program has obviously already paid huge dividends for us,” he said. “Just since 2007, three angel investment deals done through the UW were worth $1 billion, which is more than they have done in Minnesota over the past 25 years.”
Barca said he is a big fan of angel tax credits because they are “exceedingly important in terms of attracting new investments. And Wisconsin has had a plethora of deals. There were 53 deals done in Wisconsin last year alone.”
In addition, he said Wisconsin’s program is drawing companies from other states.
“First VitalMedix made its high profile decision (in July) to move from Minnesota to Wisconsin,” he said. “And that’s just one of them.”
VitalMedix Inc. is developing a drug called Tamiasyn that it says first responders, trauma center surgeons and military medics could use. The drug could allow humans to endure severe blood loss and inhibit organ damage during resuscitation. It has been tested in animals and could go into human trials this year, company officials said.
Even though Minnesota companies have made news for moving across the border, Barca said the changes in the angel tax credits law signed by Gov. Doyle or other proposed changes weren't designed with Minnesota as the focus. In fact, he recently visited Minnesota to testify before legislative committees about Wisconsin's programs.
"We talked about trying to find a mechanism where maybe there could be reciprocity between using these credits in each state," he said. “We have been looking at creative ideas so that we can work together with Minnesota, which has a lot of muscle in the medical device industry. Wisconsin has a lot of muscle in the stem cell and a number of other areas so there might be a synergy between our two states.”
Barca said he does not worry that the two states might try to battle each other with tax breaks.
“Minnesota, which doesn’t have any sort of angel investment credit, is simply trying to pass one to sort of match Wisconsin’s efforts,” he said. “I haven’t heard of any initiatives in Minnesota that they are trying to one-up us. Nor are we with our economic incentives keeping our eye on any one state.
“What we trying to do is produce the kind of business climate that encourages businesses to expand and grow and develop here in our state,” he said.
Because Wisconsin has shed more than 150,000 jobs in this recession, he said he also supports expansion of the state’s refundable jobs tax credit to boost employment.
“It is already being subscribed to at a very high level in just the first two months of this year,” he said. “There is a real need to expand that."
He also wants to see more support for entrepreneurship and further collaborative research between private businesses and the university system.
Barca also discussed some other economic development issues during the interview:
- State climate change bill
On climate change legislation, Barca said he hopes funding to boost green jobs will emerge from the Legislature.
“Climate change is a broad issue and has a lot of layers and components to it,” he said. “There are a number of bills pending that will lead to the immediate development of green jobs.”
He highlighted a bill by Rep. Ted Zigmunt (D-Francis Creek) that would give renewable energy credits to companies that use advanced lighting fixtures.
“That would benefit the lighting industry in particular (Orion Energy Systems borders Zigmunt’s district), but there are others that would benefit as well if we increase the payback for people who make investments in this type of advanced lighting.
“When you do that, you are really helping the competitiveness of our private sector. We send $16 billion a year out of state to pay for coal and petroleum and other energy resources.
“So to the degree that we can cut down on that so that we lower the energy costs for our businesses by giving them incentives to invest in modern technology, that’s a plus.”
- Federal infrastructure money
Barca lauded the effect that federal stimulus money has had on infrastructure projects.
“I know in my home community, we were able to get a number of key road projects that are tied to economic development,” he said.
“We are approving a road where Gordon Food Service is constructing a new distribution facility. So that road is vital for a distribution plan like Gordon Foods and there are a number of other road projects and bridges that are long overdue. The vast majority of Wisconsinites know that keeping up your infrastructure is vital to economic growth."
Barca also said he was pleased Wisconsin received more than $800 million from the federal government for high-speed rail improvements in the Chicago to Milwaukee to Madison corridor.
“I’m a big believer in making infrastructure improvements of any kind and high-speed rail, just like the KRM line going from Kenosha to Mitchell Field and then downtown Milwaukee. Any time you build in a fixed corridor, it attracts investment along that corridor. So whether it is a highway or a rail line, it’s vital for attracting investment.”
Barca said he is not worried that the Milwaukee-to-Madison leg will have so little ridership that it will require a big state subsidy.
“The federal studies seem to indicate there will be enough ridership to support it,” he said. “The federal government has very tight restrictions on funds in corridors and ridership is one of the factors in awarding dollars. There have been a number of studies done and I trust that those studies are adequate.”
And he said he is hopeful that the rail line will continue on from Madison to the Twin Cities.
“President Obama has made this a priority for his administration to insure that we have high-speed rail throughout the Midwest. I think the Midwest is ripe for it. The Chicago to Milwaukee corridor is (already) one of the busiest in America.”
He said he believe the Milwaukee to the Twin Cities leg would be important for economic growth and will give business and other travelers another transportation option.