Minnesota’s Angel Tax Credit — a tax break designed to spur small business investment — has been incredibly popular in the two years it’s been around.
State officials today announced that the $12 million they budgeted for the credit for all of 2012 is spoken for already.
Officials have applauded t the credits attracting $140 million in private investment for small and emerging companies since July 2010. But the credit was also passed on the belief that it would be a significant job creator. So far, that hasn’t been the case.
Here’s how the credit works: Qualified investors in the program can receive a 25 percent tax credit on investments of at least $10,000 in companies that are certified to get the credit. These are “emerging Minnesota companies that specialize in high technology or new proprietary technology.”
In its 2011 report to the Legislature, the Department of Employment and Economic Development reported that $15.8 million in credits had been allocated, generating $63.2 million in investment — but only a net 162 jobs, generating about $6.3 million in wages.
That works out to $97,531 in tax breaks for every job created by the credit through 2011.
Looked at another way, the state paid out $2.49 in angel credits for every $1 in new gross wages the credits generated through 2011.
I understand tax credit supporters hate these kinds of cost comparisons. They argue they are misleading, that eventually these companies will produce jobs so it’s unfair to look at just a couple years of data.
I also admit a bias when it comes to the credit: I believe Minnesota’s already a better state for business than many realize and I’m skeptical of any efforts to use tax policy to keep or attract businesses.
So I’ll ask these questions: When it comes to jobs and the Angel Tax Credit, how should we define success compared to the cost? When should we expect to see the jobs created that justify the investment?
– Paul Tosto