Gov: Ecn development better targeted than tax cuts


January 18th, 2011

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Gov. Heineman says he supports spending $16 million in economic development proposals, despite a tight budget year.

Lincoln, NE – Gov. Dave Heineman says it makes more sense to target $16 million toward various economic development proposals than cut taxes, because the proposals are better targeted.

The governor is supporting a package of four bills. One would subsidize internships with Nebraska businesses for college students up to $5,000, with the businesses matching those funds. Another would offer tax breaks to so-called “Angel Investors” who put up capital for startup companies. A third would use funds from real estate document stamp fees to help demolish, build, or rehabilitate industrial and commercial land and buildings. The fourth would offer grants for research, technical assistance and outreach for small businesses. Together, the proposals would cost $16.5 million of which $9 million would come from existing programs and $7.5 million would be new money.

Heineman was asked why it wouldn’t be better just to cut business taxes by $16.5 million, and let the market allocate the resources. He said cutting businesses taxes probably wouldn’t do as much for the high tech and startup companies the proposal is designed to help. Economic Development Director Richard Baier amplified the point.

“Especially in these young startup businesses, we’ve talked to them around Nebraska, both ones that are starting up now as well as ones that have been here for a long time. The tax cut, in many cases is not as important to them as sort of that initial investment, because they’re trying to get up and get ramped up as opposed to sustaining the businesses effort.”

Lincoln Senator Danielle Conrad, co-sponsor of the grant-making proposal, said it reflects a strategy called “economic gardening.” In contrast to “economic hunting,” where governments go out looking for businesses to recruit, “economic gardening” involves nurturing home-grown startup companies by offering technical assistance with things like market research that could be difficult for small companies to afford.

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