But a bipartisan group of lawmakers — including New Jersey’s Cory Booker — is backing legislation that follows a different approach to economic growth by investing directly in the development of small businesses and startups.
Reitmeyer reports that a measure introduced in October in both the U.S. Senate and the House of Representatives calls for $6 million in additional funding to go to the federal Small Business Administration (SBA) to help maintain the agency’s Growth Accelerator Fund for another five years.
Two small-business accelerators from New Jersey are among the program’s previous competition winners, according to the SBA.
In addition to providing more funding for the accelerator program, the proposed legislation also seeks to ensure the SBA is investing its resources in diverse communities where incomes aren’t already high.
Senadtor Booker (D-NJ) is sponsoring the legislation in the Senate, and in the House its backed by Reps. Lisa Blunt Rochester (D-Delaware) and Brian Fitzpatrick (R-Pennsylvania).
The small-business accelerators have a proven record of generating new investment and venture capital, but more growth can occur by addressing economic gaps, the lawmakers said.
“Innovation is the secret sauce that has fueled the American economy since our country’s inception,” Booker said in his office’s October 17 press release.
“Together we can plant the seeds of nationwide growth,” Fitzpatrick said.
Under the proposed overhaul of the federal tax code that Trump is urging Congress to pass before the end of the year, the federal corporate-tax rate would be reduced from 35 percent to 20 percent.
Trump’s tax proposal also calls for a new rate for companies whose owners don’t pay corporate taxes, but are instead taxed by the federal government as “pass-through” companies through personal income-tax rates.
The theory behind both tax-policy changes is that the lower tax rates will indirectly lead to more economic growth by freeing up capital that the companies could then devote to more investment and hiring.
But under the legislation that’s being backed by Booker and the other lawmakers, the federal government would continue providing direct support to a growing number of small-business accelerators that have been established throughout the country to help nurture the growth of startup companies, particularly in the technology field.
The role that startups and young companies can play in driving economic growth was highlighted in a recent critique of New Jersey’s economy and economic-development tax-incentive programs that was released earlier this year by international management consultant McKinsey & Co.
Citing U.S. Census data, the report showed that between 2004 and 2014 companies that were less than 10 years old experienced 17 percent growth in total employment, while companies that were at least 10 years old saw employment losses of roughly 5 percent.
According to Senator Booker’s release, the SOAR Act builds on a U.S. Small Business Administration (SBA) Growth Accelerator Fund competition, in which accelerators and other entrepreneurial ecosystems compete for funding to grow and expand their reach to engage more startups and new communities.
The release also notes that the SBA reported that the program in 2014 and 2015 funded 138 accelerators that supported 5,000 companies that raised approximately $1.5 billion and employ nearly 20,000 people. The 2017 version of SOAR would authorize $6 million in funding each year for 5 years.
While the number of accelerators has grown by more than ten times between 2008 and 2015, according to the Brookings Institution, the vast majority of growth has taken place in high-income, well-established regions.
By investing in these programs and broader tech ecosystems, the SOAR Act would unleash economic growth in low-income and rural communities and empower underserved entrepreneurs, including women, minorities, veterans, and individuals with disabilities.
According to Booker’s release, specifically, the SOAR Act funding would provide:
1) Funding offered through a competitive prize program for organizations supporting early-stage startups including new and existing accelerator programs, incubators, and universities
2) Targeted focus on encouraging growth accelerators that address key geographic and demographic gaps, including women, veterans, minority-entrepreneurs, individuals with disabilities, and rural communities
3) Increased funding which will allow the SBA to continue to expand the strength of growth accelerators across the country
4) Oversight and transparency of the program
For Reitmeyer’s full story, click here.
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