Promoting Entrepreneurship

North Carolina could do a lot more to promote new businesses.  Here's just a quick list.

  • Provide more support for mothers who start businesses
  • Redirect funding from corporate welfare to promoting innovation
  • Adopt laws promoting, rather than restricting, entrepreneurship and competition
  • Change the tax code to encourage rather than punish the risk-takes who start businesses
  • Help educate entrepreneurs

When I started a software startup in Chapel Hill in 2000, I discovered many challenges facing entrepreneurs.  Counter to what politicians would have us believe, the system is designed to punish entrepreneurs, not reward them.

For example, lately women have started most businesses in the USA.  Promoting women entrepreneurs would be a wonderful way to grow our economy.  So, why not make child-care tax deductible for people starting businesses?  I'd bet we'd get more startup traction from a free day-care center for entrepreneurs than we've ever gotten from a startup incubator.

We constantly hear about being business-friendly, but regardless of which party is in power, all we get is business welfare.  For example, think how much better we could have spent the $150M we gave to Dell to build a plant in NC, which they then shipped to China?  The R&D tax credit was $6.6B in 2005, yet no entrepreneur was able to save a dime from it.  This money is for large established corporations, not you or me.  Last year, when NC voted to give a $300M tax cut to small businesses, I thought maybe there was a politician with a clue - until I read the bill.  It's designed to give law firm with 20 layers $60K, while giving a startup with 20 employees $3K.  It's designed to promote law firms, not startups.

The laws are designed to protect existing businesses, not promote entrepreneurship.  If you start your own business, instead of paying 7% Social Security tax, you'll pay 14%.  Instead of pre-tax group health insurance, you'll be on your own, and paying with after-tax dollars.  Obamacare is good for entrepreneurs.  Why don't we ever hear about that?  Today, if you don't qualify for affordable individual health insurance, you literally risk death if you start your own company.  Tying your health care to your job is the most callous anti-entrepreneurial policy we have.  If you do start a business employing lot's of workers, but for whatever reason - say the Great Recession - you go out of business, every employee but you will qualify for unemployment.  What's up with that?  If you start your own business, first they tax you, then they take away your health care, and finally let you suffer with no safety net if you fail.

One of the simplest ways we could promote startups in NC would be to eliminate onerous "non-compete" clauses from standard employee contracts.  California severley limits such clauses, which is partly why Silicon Valley is in Caliornia rather than on the East Coast.  Why would any state that promotes new businesses put up with such an anti-competitive practice?

At a recent meetup at Tylers to discuss startup ideas, I found most of the entrepreneurial people I met lack the skills to start their business.  Most common was lack of programming skills.  One thing I've found starting businesses is you usually have to do everything yourself, even down to coding the web page or designing the electronics.  Why aren't we teaching these skills in high school?  So, here's another idea: why don't we offer the missing education for free to individuals who want to start their own business?

When you do manage to get it all right, and you start a successful business, it's likely you'll find yourself on the other side of this fence.  Who cares about Social Security tax if you make 5X over the limit?  Social Security is a middle class tax.  Who wants Obamacare when the current system creates strong incentives for your employees to stay?  Why reform the laws about non-competes when they keep any of your employees from quitting and starting a business in your market?  If you're company is printing money, it may be eligible for some corporate welfare.  Time to start making political donations.

On the bright side, the government does a decent job of funding and promoting some innovation. Universities and small companies often get innovation grants, and it often results in new ideas and technologies.  It's one of the areas that is sort of working.



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