A Market-Based Approach for Crossing the Valley of Death: The Benefits of a Capital Gains Exemption for Investments in Startups

9 Pages Posted: 7 Feb 2012

See all articles by Robert E. Litan

Robert E. Litan

Council on Foreign Relations (CFR) - Council on Foreign Relations- Washington D.C.

Alicia Robb

University of Colorado at Boulder; Next Wave Impact; Federal Reserve Banks - Federal Reserve Bank of Atlanta

Date Written: January 1, 2012

Abstract

Without making any bold claim of a “free lunch,” there is nonetheless a compelling case to be made that permanently exempting investments in start ups from any capital gains taxes for five years would come reasonably close. It would conservatively boost annual equity investment in start ups by 50 percent more than the annual revenue loss to the federal Treasury. Such investments also likely would be disproportionately channeled to potential high-growth firms, which also punch well above their weight in terms of job creation potential as compared to other start ups. Given the need for additional jobs in this anemic recovery, the case for inducing additional start up investment through the capital gains tax exemption is strong.

Keywords: capital gains, tax exemption, policy, startup

Suggested Citation

Litan, Robert E. and Robb, Alicia, A Market-Based Approach for Crossing the Valley of Death: The Benefits of a Capital Gains Exemption for Investments in Startups (January 1, 2012). Available at SSRN: https://ssrn.com/abstract=2000836 or http://dx.doi.org/10.2139/ssrn.2000836

Robert E. Litan (Contact Author)

Council on Foreign Relations (CFR) - Council on Foreign Relations- Washington D.C. ( email )

1777 F Street, NW
Washington, DC 20006
United States

Alicia Robb

University of Colorado at Boulder ( email )

Leeds Business School
Boulder, CO 80309
United States

Next Wave Impact ( email )

7455 Park Lane Road
Longmount, CO 80503
United States

Federal Reserve Banks - Federal Reserve Bank of Atlanta

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

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