Kauffman Startup Act Facing Headwinds

The Ewing Marion Kauffman Foundation is one of the largest foundations in the world and their lobbying power for small business development and the empowerment of entrepreneurs is unmatched. Recently they offered a four part plan for small business development to Washington law makers and although many believe that it makes sense in the current economic environment, Washington insiders don’t believe that it will gain the momentum necessary to have any impact. “The Startup Act” as is has been called, is essentially dead on arrival according to insiders.

The Kauffman Foundation’s Startup Act isn’t full of new and innovative ideas but that was never the intent.

Provide Expedited Patent Processing– Charging a higher fee for expedited service was placed in the recent patent reform laws that were passed by both the House and the Senate.

Green cards for STEM Owners– This would allow foreign students of math, science, engineering and technology who studied in the United States to be granted a green card if they start a business and hire workers. This has been introduced and reintroduced in Congress but hasn’t gained traction.

Make permanent the capital gains tax cut for investment in small business– Currently, companies who invest in business startups no larger than $50 million in market cap receive a tax exemption. This is set to expire in 2012 but in an environment where budgetary concerns have taken center stage since the recent debt ceiling debate and the downgrade of American debt, cuts like these aren’t likely to be made permanent.

No income tax on the earnings of a small business during their first year– Although it would give much needed help to a business that need to reinvest as much money as possible, policy researchers argue that the United States is full of small businesses, many of which will fail in their first year with or without an incentive such as this. These same analysts argue that we don’t need to incentivize more small business development but instead, support businesses who have shown longer term viability since most business startups don’t hire employees in their first year.

The Kauffman Foundation argues that although an initiative such as this would lessen government revenues from small businesses, it would be made up by the amount of new businesses that would form as a result of a more small business friendly economic environment.

Kauffman CEO Carl Schramm knows that the current Washington environment makes enacting legislation such as this challenging but also believes that keeping these issues in the forefront of the minds of lawmakers and the public has value. When people talk, new ideas are formed.