Startup Tax Holidays: The Business-Friendly Policy That Pays for Itself

It’s the question on every policymaker’s mind these days: How do we get entrepreneurs to start businesses in our backyard?

Every state, county and city is different, so there’s no magical, one-size-fits-all formula for startup success. But there are some tactics that are broadly applicable to a wide range of situations. One particularly ascendant approach is head-slappingly simple: tax holidays for nascent startups. Done properly, such holidays are highly cost-effective. And they’re great for putting hitherto-unknown startup hubs on the map. Here’s a look at what tax holidays for early-stage companies entail — and how local economies can benefit.

A Clear Competitive Opportunity

State and federal tax laws often favor established firms — a condition often referred to, invariably in a negative sense, as “corporate welfare.”

Despite increasing barriers to entry in many industries, it’s far less common for early-stage companies to get favorable financial treatment. Jurisdictions that buck the trend and favor young, disruptive businesses therefore carve out a slice of the competitive pie for themselves.

One Way to Keep Up With the Joneses

Although economic development isn’t a zero-sum game in which one state’s loss is another’s gain, it’s impossible to ignore the powerful competitive pressures exerted by an increasingly globalized economy. Single jurisdictions that say “enough is enough” and refuse to offer business-friendly incentives might achieve some measure of moral victory, but the cost — measured in lost taxes, fewer jobs and shrinking cities — certainly isn’t worth it.

With this in mind, it’s critical for state incentives to stay ahead of the curve. Tax holidays for young businesses as well as companies that pledge to relocate from out of state have been proven to boost economic performance and lure dynamic firms.

A Revenue-Neutral Proposal

These days, “but how much will it cost?” is an increasingly common political refrain — a latter-day incarnation of “it can’t be done.”

Taxpayers should thank their political leaders for subjecting public-spending and business-incentive proposals to close scrutiny, particularly when public monies are involved. They should also be grateful for leaders who understand the value of public investments and aren’t afraid to make tough choices that take a long view of development and prosperity. That’s why the concept of tax holidays for new or relocated businesses is so attractive: According to economists, the upfront costs of the incentives is often offset — and sometimes surpassed — by income and sales tax receipts attributable to newly created jobs.

Who’s Leading By Example?

The concept of business-friendly tax breaks isn’t new. In fact, incentives for entrepreneurs and small business owners have been around almost as long as the tax code itself. But state and city governments have only recently discovered the power of tax breaks aimed specifically at nascent businesses that pledge to incorporate or headquarter in a particular region. Not surprisingly, some places are farther down this path than others.

Take Massachusetts, long recognized as a hub for high-tech startup activity. Local luminary Chip Flowers proposed an innovative and cost-effective strategy in a recent op-ed. His plan, likely set to be fleshed out in the coming months and years, outlines a sensible set of criteria for identifying and supporting promising firms that deserve public investment.

Should Flowers’ proposal prove successful — and, by all indications, it’s a fundamentally sound plan with tremendous potential — it’s fair to bet that other states will follow suit. And that won’t simply be a victory for early-adopter jurisdictions. It’ll be a triumph for the American economy.

5 Ways Parents Can Teach Kids About Money Now

Numerous studies Chip Flowers has seen, have shown that kids don’t have a solid understanding of money. They’re spending money as if it grows on trees, opening credit cards and living far beyond their weekly allowances. Good financial habits start in childhood and with only 17 states requiring a personal finance course for students, educating kids really lies in the hands of parents.

It’s important to start educating your children now about financial literacy. Here are five ways to begin now.

Explain Where Money Comes From

Many kids see their parents either walk up to the ATM or the bank and leave with money. No, there is not a magic money tree inside but kids may think so. There is more to these money outlets.

Take your child to one of these venues and explain what services are provided: a place to safely keep your hard earned money, receive cash or obtain a loan. If you take them to the bank, ask the manager if he can give your child a tour and explain what the bank offers.

Give Them an Allowance

As your child begins to understand the role of the ATM and the bank, you may have whetted their appetite to have their own money. Start giving them a set weekly allowance for the chores that they perform. This will enable them to see the relationship between working and getting paid. It will also help them as they grow older and begin part-time jobs, earning more money and seeing its value.

Create a Budget

Upon receiving money, it may be burning a hole in your child’s pocket. Learning to save and spend is important so creating a budget for you child can be helpful. This will allow him to do both with his allowance. Revisit this budget on a set basis and make adjustments based on your child’s actions and goals.

In addition, for your teenagers, start preparing them to leave the nest by introducing them to checking accounts and credit cards.  By teaching them these financial basics and seeing the inflows and outflows alongside their budgets, it will make them more financial savvy when they’re living independently.

Learn the Difference: Wants vs. Needs

Whether it’s saving or spending, money management lessons need to include a differentiation between what we want and what we need. For kids, they may want a new toy or video game. By deciding if it’s a necessity or just a desired gift, this will build the foundation for managing finances and help kids learn to appreciate saving money for items they want. You’ll be surprised how conservative kids can be with money.

Use the Piggy bank

With your kid’s weekly allowance or a money gift, take that piggy bank in your child’s room and put it to use. By saving money, it will allow kids to discover its value.  You can start with a mutually agreed upon weekly goal or percentage. To show your commitment, also put aside some money with your child.

For older kids, have them open a savings account. This will provide an opportunity to learn about savings, interest and fees. Discuss different savings accounts and help you child decide which is the best choice for them.

These five steps are just the beginning of your kids’ financial education. By developing good habits early on, your children will have a greater understanding of money. They will take these habits with them as they grow older and face the many challenges that will come with money.

10 Sites for Kids Chip Flowers Thinks Makes Finance Fun

April is National Financial Literacy Month and a good excuse not only for adults to brush up on their financial skills but also a great time to teach kids about money. Whether it’s asking their parents questions, learning to save, spending their allowance or receiving their first paychecks, there are numerous ways kids can learn about money. Another method is through the Internet with its wealth of sites to teach and engage kids. These sites are all kid-friendly and hip to their increasingly mobile trends.

Take a look at these 10 great financial websites for kids recommended by Chip Flowers.

Kids of all ages:

Institute of Consumer Financial Education  – The ICFE/Kids section gives a host of money information and resources for kids. Young ones can learn about savings, credit and investments while older kids can study credit, the dangers of accumulating debt and financial planning.

The Mint.org This site has something for everyone from young kids playing games to earn, spend, save and give money while older ones will enjoy the story of money movement and numerous quizzes and calculators.

Kids’ Money  – This dynamic, interactive site helps kids develop money management and money-making skills. It then shows through savings, the possibility to buying a coveted item such as a pair of sneakers or a video game. The site welcomes contributions and suggestions.

Elementary students:

Centsables – The Centsables, bankers by day but superheroes at night, battle the bad guys, saving kids from money mistakes and bad financial scenarios. Along with its videos, the interactive site also has games, comics, and activities to help kids get money management skills.

Sesame Street’s For me, for you, for later  – Using Sesame Street’s beloved characters, this site enables kids and their parents to view and create a dialogue on financial basics. Videos and games assist with the teaching and for offline activities, there are podcasts and printables. 

Kids Math Games -Kids will have a chance to learn about money through interactive games, which will enable them to count and use money. They can also open a new business such as a lemonade stand or a coffee shop to learn additional financial basics.

Middle school:

Kids.gov The money section for middle school students includes videos on credit card facts and real-life expenses. There are also money vocabulary lists, tools and links to expand their money education.

Sense and Dollars  – This interactive site has numerous money games to play. For kids desiring to leave home and become financially independent, the Check It Out game, shows a dose of reality as participants will get a job, a monthly income and bills to pay. It’s challenging as kids will learn the value of money through this experience.

High school:

American Saves  –Kids 14 and older can enroll in the Younger Saver program and set a personal monthly saving objective as low as a $5. The selected amount can be saved in different ways. The site also offers advice, encouragement and tools to achieve this.

Financial Football For the sports-obsessed kid, this sites offers Financial Football and Financial Soccer video games. Kids will select a team and take financial management quizzes as their players move along the field, scoring points through their answers. Additional quizzes and calculators are also included on the site.