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: