Can tax credits work?

That’s the question A.J. Mackenzie asks in an essay in this week’s issue of The Space Review. There have been several proposals to provide tax credits to those investing in new space ventures; as previously noted here, Ken Calvert, the incoming chair of the House Science Committee’s space subcommittee, has been pushing one such proposal for some time. Mackenzie believes that tax credits will not be effective because space companies do not have good business plans to most potential investors because of the long times it takes for space ventures to start making money as well as the limited size of the space market. Moreover, there is already a group of “true believer” investors out there willing to spend money on space companies without the existence of tax credits.

One thing Mackenzie leaves out in his article is that there is a test case for tax credits already: Rocketplane Ltd. won tax credits from the State of Oklahoma in a program patterned after the Calvert-Ortiz federal legislation. (Rocketplane executives call this “winning the O Prize”.) It remains to be seen, though, whether Rocketplane will be a success, and how big a role the tax credits will have played.

5 comments to Can tax credits work?

  • If you want more of something, subsidize it. Saying it is not going to do much means it’s not going to cost much either. Open contracts are not an either/or proposition.

  • Rich Pournelle

    Federal tax credits like the “Invest in Space Now” bill are a non-starter as they have been proposed. Every bill in Congress gets “scored” for its impact on the Federal Budget (deficit). That bill is always scored so high it will never go anywhere because they would have to make cuts in other areas of the budget to make room.

  • John Malkin

    I would like to see a section in the tax form where people could allocate money on a voluntary basis, something like the election fund. These monies could go into funds for entrepreneurial companies and companies that find solutions for age old problems. The prizes and/or tax credits would be based on the size of the fund. This could include solving homelessness or curing diseases. It would allow individuals to have a more direct link to how their money is spent even if itís a small portion.

    It seems a successful space company would generate tax money and jobs which would surpass the amount of the tax credit in the long term.

  • A limited tax credit of $100M payable in 2015 might not score so high.

  • John Malkin

    I had to laugh this morning, when and advertisement on the radio for a government grant seminar which claimed the government spent over $300 Billion on grants last year. I would like to know their definition of grant. Maybe some space private companies should go to the seminar. Just joking…