Lawmakers propose expansion of tax credits for businesses, supports for Vermont exporters

by Hilary Niles vtdigger.org State government needs to do more to help Vermont businesses expand, Representatives Paul Ralston, D-Middlebury, and Heidi Scheuermann, R-Stowe, believe. The two lawmakers are pitching an economic innovation bill, H736, that would encourage entrepreneurship and boost the state’s economy.
The strategy of attracting businesses through deep tax cuts and other incentives ‘ increasingly popular in New York, Texas and other states, however, is not an option for Vermont’s relatively small and rural population, Ralston and Scheuermann say.
The bipartisan pair Thursday proposed a multi-pronged approach to growing the economy by helping companies that are already here get started and scale up.
Ralston and Scheuermann call their strategy ‘Unlocking Vermont’s Economic Potential.’ The plan is extensive, touching more than 25 sections of state law and many agencies. H.736 aims to spark ‘new economy’ entrepreneurship and support Vermont’s ‘legacy’ industries as they evolve in the regional economy. The initiative would cost $85,000 in state expenditures, Ralston said. More financial backing would bolster new lending from the Vermont Economic Development Authority.
Their goal, they said, is to leverage existing structures to achieve policy goals already identified by state government: smart growth, energy efficiency and working landscape among them.
Testimony before the House Commerce and Economic Development Committee Thursday focused largely on domestic export ‘ or, exporting Vermont products not just to other countries, but to other states. Some existing programs help Vermont companies reach international markets, but that scale is not necessarily appropriate for many small businesses, Ralston said.
State government already is engaged in economic development on many fronts, but most of them stop ‘before we actually get to market,’ Ralston said. ‘The final step is the most important one.’
Help for domestic exports might come in the form of grants to bring companies to trade shows, business planning to help small businesses ramp up to the next level of commerce or possibly technical and marketing assistance. The program would be part of ‘Made In Vermont,’ an initiative in the Agency of Commerce and Community Development.
The bill suggests appropriating $75,000 for the domestic export initiative. Two-thirds of that money would go directly to programming, while the remainder would cover administrative costs.
Another $10,000 would underwrite business networking events through the Vermont Technology Alliance, bringing state spending in the bill to $85,000, Ralston said.
The proposal also calls for limited tax credits for private investments in new and expanding businesses. Estimates for potential lost revenue from credits and discounts for investors and companies are being calculated by the Joint Fiscal Office, Scheuermann said.
Tax credits would be available for private equity investments. Over the course of four years, Vermont investors could earn a 60 percent tax credit for investing in small businesses and startups.
Scheuermann said that, while tax credits in places like New York are too steep for Vermont to match, the state also cannot afford to ‘front-load’ an economic development strategy. The sponsors’ goal is to encourage private investment in Vermont businesses, and tax credits are a reasonable way to reward investors who take that risk, she said.
A unique source of capital in Vermont that lawmakers would like to extend to smaller businesses is immigrant investment through the federal EB-5 program. The Immigrant Investor Program puts foreigners on a fast track to U.S. green cards for themselves and their families when they invest $500,000 to $1 million in an American business that creates 10 jobs within two years.
Jay Peak Resort has leveraged EB-5 funds to grow into a four-season destination, and management there is involved in still more ambitious plans to develop Q Burke Mountain ski area, downtown Newport and establish a Korean biotech firm in the Northeast Kingdom.
But costly hurdles, including extensive economic analyses, must be overcome before being eligible for the funds ‘ hurdles that sometimes exceed the price tag of the investment small businesses are seeking.
The House Commerce Committee began discussing ways for small projects to ‘bundle’ their needs and resources into single EB-5 projects. Work force housing is identified as a challenge even for those businesses already bringing immigrant investments to the state.
Several other aspects of H.736 will be discussed in the coming weeks. A break on electricity costs for manufacturers, an exclusion from the ‘cloud tax’ and changes to securities laws for knowledge-based businesses in the state are among the remaining proposals to be discussed.
House Commerce Committee chair Rep. Bill Botzow, D-Bennington, said lawmakers in his committee had signed off on the bill to show their support for the discussion of related issues. He underscored that it does not indicate unanimous endorsement of all the provisions.