E.J. Reedy, director of Research and Policy at the Kauffman Foundation, addressed members of the U.S. House of Representatives regarding the role of entrepreneurship in creating economic opportunities for Americans.
Reedy discussed entrepreneurship and its role in job creation, as well as the new Foundation initiative called the “New Entrepreneurial Growth Agenda." The initiative aims to tackle the challenges facing new business creation.
Photo Courtesy Julie Merz
Reedy also outlined several areas of federal policy that could be addressed in a way that strengthens the environment for entrepreneurial activity. Below is an excerpt and video from his address that outlines these five key areas policymakers can consider to create lasting economic growth.
The structure and design of the tax code shape entrepreneurial decisions. Research from the Tax Policy Center shows that existing tax incentives for investment aimed at small businesses don’t always achieve their goal. The tax code limits the ability of startups to use tax losses. Some provisions, like Section 179, benefit startups differently depending on how firms use capital. Along with the overall complexity of taxes, especially for new and first-time business owners, research suggests tax design makes a difference for entrepreneurs.
Immigrant entrepreneurs make jobs for Americans. Immigrants are more than twice as likely to become entrepreneurs as native-born Americans. Kauffman research suggests that changes to immigration law, including the creation of a visa for immigrant entrepreneurs, can boost economic growth and job creation.
Regulators should follow the lead of entrepreneurs and embrace disruption. Research suggests that the layering of regulation atop regulation can, over time, create rigidities that overwhelm and burden young firms. Technological innovation occurs at an ever-increasing pace and regulation must keep up. That means regulatory bodies need to be nimble in order to respond and adapt to new innovations and business models created by entrepreneurs. Policy ought to be formulated so these innovations are not suffocated, but rather given an opportunity to compete. Often, that means updating or getting rid of old regulation as much as it does enacting new rules.
At its best, intellectual property law facilitates innovation. Yet, firms can use patents and other forms of intellectual property in inefficient and anti-competitive ways that make incremental or follow-on innovation by others a more challenging and costly process. Research suggests that intellectual property law should be balanced so as to maximize incentives for innovation.
Disruption and innovation must be allowed to happen. For entrepreneurs to bring new ideas to life, they need a level-playing field on which to compete. Laws and regulations can create barriers, which may keep entrepreneurs out or make it harder for them to gain traction because the playing-field is tilted in favor of older firms.
Entrepreneurs are vital to a strong and dynamic economy. When entrepreneurs are able to start new businesses, and they are able to thrive, they establish a platform of opportunity. Policymakers should be aware of how broader policy decisions, like immigration or tax policy, can promote or prevent the benefits of entrepreneurship.
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