Small biz tax credits, yes but…

PEI has become the latest jurisdiction to offer a tax credit for investing in small businesses.

The Community Economic Development Business program (CEDB) offers Islanders a new method to invest in the economic development of their own communities, Sheridan said.  Through the CEDB program, an eligible business obtains equity financing from fellow community members and the Province provides a 35 per cent personal income tax credit, the Community Development Equity Tax Credit, to the individual.

I have said before that I offer qualified support these types of programs but I think people need to understand the limits to their efficacy.  The vast majority of small businesses are providing services in the local community or area in which they operate.  They are plumbers, electricians, dentists, consultants, hair dressers, car repair shops, coffee shops, etc.  Encouraging others to invest equity in these firms will likely strengthen many of them and have other positive effects but it won’t necessarily lead to new jobs and a broadening of the tax base.  These come from growing the economic pie not from injecting new capital into the dentist sector.

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One Response to Small biz tax credits, yes but…

  1. mikel says:

    I’ll take the revenge of the CCNB-since I doubt many read the blog. IF David were really into ED and had no biases, HERE is what he SHOULD have written:

    “Although I’ve never said it before, there is no limit to the potential of an individual company. RIM started from small beginnings and made its initial investors wealthy beyond their wildest dreams. Same for Microsoft and Facebook, and it even made an impact on the wallets of shareholders, including our province, in the case of Radian 6.
    The only caveat I would offer goes out to potential investors of local companies. Be on your guard for the local company that is content with local sales. Be aware of where your money goes and why. While a local company run by a local seemstress who is a single mother who needs to get off welfare and has an extensive background in the craft may make a worthwhile goal in that it makes a member of the public more productive and less a drain on the welfare system, odds are that it won’t be a phenomenal growth factor for your RRSP. Worthwhile, yes, a huge money maker, well, thats why you get the tax credit!

    Be on the lookout for those with big plans, good ideas, and a mind toward a global economy. Anybody that talks about ‘the local market’ in Summerside doesn’t have big ideas. Technology and the knowledge industry are mainstays of the new economy, and they are the money makers. When you decide where to invest, make sure these are part of your list. They may be hit or miss, but that’s why investing is a risk (and that’s also why you get the tax credit!) And make sure your investment isn’t just funds. If there is something about the business plan that you think stinks, say so. Be vocal, and be involved-at least be a customer.

    In the past I’ve lamented that NB’s pension fund invests NOTHING in New Brunswick, but plenty in mortgages in the US (like that’s not risky). I also lamented that even our personal finances really have no local companies in them, and on this blog we debated where exactly these companies might be. Well, we know where they are, they are lined up getting investment from Toronto and from government because there is little point in trying to get money from locals. In PEI that has all changed, there is a place for investors to put their money into local business ideas, and that’s a good thing. It’s such a positive thing that it makes me wish we had something like that here in New Brunswick. There is the potential for the next facebook in any kid at any school in the province-in fact, any PERSON , and boy would my retirement plan love to have one in its portfolio.

    So here’s to an actual new economic development plan. No, it may not be a saving grace, but in a small province, I wonder just how many ‘Radian 6’s’ are necessary to create a ‘have’ province-and all without messing with the water.” Here’s to hoping that the New Brunswick government, which talks a lot about small business, takes a page from PEI.

    And on tomorrow’s blog, how prostitution and drug legalization helped build Nevada’s economy!

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