A September editorial (Our View, September 22) in the Press Herald, Kennebec Journal and Morning Sentinel seems to suggest Maine may not be getting the best bang for the buck when it comes to the Maine Seed Capital Tax. Credit. This view and a blog post a day earlier by the liberal Maine Center for Economic Policy are both myopic and misinformed.
Both documents relate to the release of a report by the Office of Program Evaluation and Government Accountability on the tax credit. The goal of this program, the first in the nation, was to encourage equity investment in Maine companies through private venture capital funds – investments that have generated millions of dollars in investment since the promulgation of the tax credit. It is also important to note that the Maine Seed Capital Tax Credit was cited in the Mills administration’s 10-year economic development plan as a strategy to promote innovation.
Without getting into the nitty-gritty of the issues raised in both the editorial and the blog, suffice it to say that both opinions either don’t understand the tax credit, don’t acknowledge its success, or don’t acknowledge the solutions relatively simple to OPEGA’s suggested problems with the program. .
Let’s start with the fact that this program, like other tax incentives, works. How do we know this? To begin with, this is due to the simple fact that it is used by companies to attract capital investment to the state. It could be argued that when you increase investment, jobs will follow and jobs will be created and retained. These investments have helped Maine prosper and attract the capital needed to sustain our economy and, in turn, increase revenues for education, health care and more – in other words, precisely the type of investments that at least one commentator thinks this state needs more of.
In a global economy, where Maine already has its fair share of built-in challenges, if you have no investment, you have no tax revenue, and you have no money to spend on other things like education and health care. Money just doesn’t fall from the sky. If we as a state want to compete for the kind of jobs this newspaper and others want to attract, we must remember that we are competing with 49 other states and countless countries around the world to all kinds of jobs and opportunities. How is Maine going to stand out if we don’t provide investors and their jobs with a reason — or an incentive — to choose Maine?
Offering the Maine Seed Capital Tax Credit as an incentive to choose Maine largely is. the purpose of the program. Can the program be improved? Of course it can, and we’re not saying it shouldn’t or can’t be. In fact, the agency administering the program, the Finance Authority of Maine, has eloquently pointed out that if there are reporting or compliance issues, the legislature and stakeholders should have a conversation to address them. But let’s not make reporting and compliance so burdensome that it discourages companies from doing business in Maine.
Maine’s Seed Capital Tax Credit has been a huge success. So much so that other states have adopted it as a model. As I pointed out earlier, corporations – and the states that want and need them – operate in a model of pure global competition when it comes to attracting capital. Other states offer far more than Maine can hope to offer when it comes to investment incentives. But Maine’s seed capital tax credit puts Maine in a stronger position to compete. Let’s not lose sight of the importance of this and the significance of these programs for the economic future and the people of Maine.