QSBS

Nothing sparks innovation quite as well as more taxes…

Wait…What?

Right now, the House Ways and Means Committee is meeting to discuss a controversial amendment to the Qualified Small Business Stock (QSBS) tax exemption.

The proposed legislation would drastically reduce who is eligible to benefit from this tax incentive. 

So, a lot of us would say that the government needs to stop giving corporate handouts.

Look, I get that.

But QSBS is NOT about big corporations.

It’s about the little guy, the underdog, the ambitious founder with a breakthrough idea, but without the funds to make it into a reality. 

Carrying a business—deep-tech or any other—from ideation to research, development, hiring, and all the way to the consumer market requires money…

A lot of it!

That’s where the venture capital system comes into play.

Venture investment is key to ensuring that the country’s greatest entrepreneurs get the support they need.

Investors spot an explosive startup and lend expertise, support, and of course…investment.

In fact, it was President Obama’s “JOBS” Act that made the 100% QSBS exemption stick.

The attempt to roll back this benefit will cost more than the actual taxes gained. 

In 2019, the Joint Committee on Taxation estimated the tax revenue lost from QSBS as ~$1.2B per year.

Okay, well that sounds bad, right? Take a deeper look. 

You’ll find out that the infrastructure of the bill is projected to cost $3.5 trillion! 

Yes, that’s trillions of dollars, not billions.

So, how does this make sense?

The bottom line is: if we cut the benefits of supporting early-stage companies, we risk missing out on the next potential Netflix, Uber, LinkedIn, etc.

We also miss out on the jobs and that impacts the economy from a macro level.

Political affiliation doesn’t matter in this case.

Our country’s greatest minds need our continued support.

Cutting QSBS benefits is bad for business.

That’s one thing we should all agree on.