Perspectives

States use credits & incentives to attract startups and technology companies

Credits and Incentives talk with Deloitte

​“Credits & Incentives talk with Deloitte,” is a monthly column by Kevin Potter of Deloitte Tax LLP, featured in the Journal of Multistate Taxation and Incentives, a Thomson Reuters publication. The May issue of “Credits & Incentives talk with Deloitte” highlights some of the states with noteworthy programs focused on attracting and retaining technology companies and startups.

Creating an environment that encourages technology businesses to open up shop

Business headlines increasingly feature stories covering the rapid rise of technology startups and the related eye-popping IPOs. This press highlights recent technology industry growth at roughly three times the rate of the rest of the private sector, with each high-tech job creating 4.3 additional jobs throughout the rest of the economy.1 Technology companies currently employ just under 6 million people in the United States with compensation at 98 percent more than the average for the private sector.2 Facebook, Twitter, Instagram, and Snapchat, unheard of around a decade ago, are now household names, while traditional service companies are being displaced by the sharing economy that has been encouraged by the likes of Uber, Airbnb, and Venmo.

The success and growth of the technology industry has not gone unnoticed by state legislatures, as the states recognize that these companies produce more vibrant communities by boosting job creation (including the trend among established technology companies to hire from local universities3), revenues, and intellectual capital. Consequently, the states have responded in a number of ways to attract technology businesses.

Through various credit, incentive and similar programs, states are working to create an environment that encourages technology businesses to open up shop within their borders, with the hope that the next Apple or Microsoft emerges as a taxpayer and job creator for the local population. These programs also seek to keep established startups from moving to other states as the competition to lure tech giants away from one state and into another heats up. Finally, in a nod toward the life-blood of startups, many states provide credits to the investors that fund the businesses at early growth stages.

The May issue of “Credits & Incentives talk with Deloitte” highlights some of the states with noteworthy programs focused on attracting and retaining technology companies and startups.

1 Dominic Rushe, The Guardian, "Technology sector found to be growing faster than rest of US economy," Dec. 6, 2012,.
2 TechAmerica Foundation, "Tech Industry Employment Grows in 2012".
3 Joanna Pearlstein, Wired, "The Schools Where Apple, Google, and Facebook Get Their Recruits," May 22, 2014.

Did you find this useful?