Angel Tax Credits: What Do the Reports Say about Job Creation?

By: Ken Kousky, BlueWater Angels and Krista Tuomi, American University

Angel tax credits are a common policy measure aimed at boosting startups. They are relatively simple and cost-effective for states, and can result in high quality job creation. Credits can also be more effective than a capital gains tax reduction in stimulating early stage companies, since investors get the credit up front whether the investment realizes a gain or not.[1]  Currently 27 states have some form of early stage capital tax credit, the mode being 25% of invested capital.[2] 

It appears that the credits do actually spur new investment as opposed to just rewarding existing investors.  In a report by the Minnesota Department of Revenue, 48% of surveyed angels would not have made their investment without a 25% credit and 34% would have invested less. The Minnesota figures are bolstered by a survey of angels, conducted by Tuomi and Boxer in 2014. In this survey, 69% of respondents claimed that the credit influenced them to invest in more firms or invest more money. Some of this private capital may be displaced from alternative investment in the state, but it is likely that much of this would have been otherwise placed in national capital markets.[3]

But do they create the desired jobs? Data from state Revenue Departments suggests some interesting outcomes.

  • Maryland has an average per company job creation rate of 6.9 and a retained rate of 4.9.
  • The figures for Maine are 11.3 and 28; Louisiana, 2.8 and 4.6, respectively.
  • Minnesota only reports new jobs, with a figure of 2.8 per company.
  • South Carolina tallies 3.8 employees per firm in the first year of its program, although this cannot be directly compared since it does not differentiate between new and retained.

(Figures were averaged over all the years that the program had collected data).

These figures vary substantially. This can be due to factors ranging from the length of program, the size of tax credit, the type of industry and obviously, reporting inconsistency. Despite this, these results are extremely promising. In fact, it can be argued that these figures are more impressive than they first appear for a number of reasons.  Firstly, these are merely direct jobs and do not reflect the full impact of these firms through their multiplied effect on suppliers and customers. Secondly, with the exception of Maine, all these programs started during the recession. During this period, many medium and large firms were actually cutting jobs.  To quote one statistic, job losses for firms with 1000 or more employees were 26% higher than in pre-recession period.[4] All the more reason to expand support for these programs.

New Jobs Created by Firms in State Tax Credit Program


New Jobs Per Company

Retained Jobs Per Company












South Carolina

3.8 (new and retained)


[1] National Angel Capital Organization (2013), Innovation and Productivity Tax Credit (“IPTC”) Overview, NACO publication.

[2] For 32% of states the credit is in the 20%-25% range, 26% offer a credit between 30%-40%, and 25% between 45-50%. Eight percent each have a credit lower than 10% and greater than 60%. 

[3] Early Stage Business Tax Credits: Benefit or Cost for US States? with Boxer, under submission.

[4] Sanchez and Ricketts, 2012, Job Gains and Losses During the Great Recession, Federal Reserve of St. Louis publication.  


Shoot at anything that flies; Claim anything that falls
Kevin Schulte  7 years ago 
Shoot at anything that flies, and claim anything that falls.
Kevin Schulte  7 years ago