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Article Title

New Business Development

Authors

Hugh L. Carey

Abstract

This article discusses ways in which the states and the federal government can promote the continued development of new business. Carey identifies three reforms in which states could institute that would improve the business climate: taxes, development finance initiatives and regulatory reform. He discusses how current tax policies discourage risk taking behavior and suggests that any tax cut should aim to increase the liquidity available for capital investment, such as exempting investments made within a firm's first five years of existence from state capital gains tax, refunding investment tax credits, and broadening state sales tax exemptions. Carey also highlights how states could improve the operation of private markets with the use of public pension funds, exemptions to state usury law limitations and policies that incentivize private investment. However, infrastructure and energy issues are significant obstacles that need to be addressed in order to accomplish this business development. Carey also examines the federal government's role in this endeavor, arguing that it should lay the groundwork for increased economic stimulation in the future through strategic tax cuts and a reduction of "fiscal federalism." Specifically, Carey notes that domestic programs should be administered jointly by federal and state governments to ensure consistency and efficiency in federal policies.

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