During the recently concluded presidential campaign, Barack Obama promised to eliminate capital gains taxes to help stimulate the economy. This is big news for start-ups, so let’s look into what this will mean in the coming months for small, fast-growing companies.
Obama’s position on eliminating capital gains taxes is clear, and is spelled out on his website:
Barack Obama believes that we need to reduce burdens on small business owners, many of whom are struggling to succeed as health care and energy costs continue to skyrocket. Barack Obama and Joe Biden will eliminate all capital gains taxes on small and start-up businesses to encourage innovation and job creation.
Start-ups and small business are important engines of the national economy. There are approximately 25.8 million businesses in the United States and more than 99% of employers are small businesses, according to a report published by the U.S. Small Business Administration.
Many of these start-ups and small businesses depend on venture capital and invested savings to run and grow their businesses. By eliminating capital gains taxes, entrepreneurs will be able to keep more of what their investments return for them. The idea behind this move is that entrepreneurs will have more incentive to start new companies because the payoffs will be higher. Eliminating capital gains is designed to help encourage more entrepreneurs in an effort to grow the economy in the medium- to long-term. In the short term, the government will lose an important revenue stream from capital gains taxes, but Obama’s first priority when he takes office will be to stabilize the stumbling economy. This may be helpful in achieving that goal.
There has been no public comment from Obama on whether he plans to stick to this particular campaign promise, but we’ll keep you updated with the latest.