Politicians often focus on luring large companies into their communities by providing huge tax breaks and other incentives. Indeed, Illinois policymakers have spent immense sums of money attempting to entice corporations to move into the state.
Providing these tax incentives to large companies can put small businesses at a disadvantage and often results in government employees picking winners and losers. While there are more arguments against employing an economic development strategy reliant on providing large and individualized tax incentives to sizable companies, this piece focuses on alternative strategies for economic growth in Illinois.
Local investment in small businesses can support neighborhoods and grow our economy. It can create wealth and jobs in communities throughout Illinois, including those struggling to foster economic development. One vehicle that can support local small businesses and entrepreneurs is intrastate equity crowdfunding. Legalized in 2016, this law allows nonaccredited Illinois residents to invest up to $5,000 a year, through a crowdfunding portal, into a company they believe will succeed.
Imagine the value of allowing the fans of a local small business to invest $500 or less into that enterprise. Consider the benefit of a community coming together to invest small sums of money into their favorite diner or bookstore.
Neighborhood residents who lack options to purchase fresh produce might support a local entrepreneur focused on bringing a grocery store into the community. Intrastate equity crowdfunding can fuel the growth of small businesses while democratizing the ability for Illinoisans to make investments.
Intrastate equity crowdfunding has so much potential. However, it has not gained traction, in part, due to a lack of engagement and support by policymakers. Building a crowdfunding portal is one thing, however, designing a campaign around this novel and exciting concept is just as important. Illinois politicians should allocate resources not only toward building a robust, community-focused, intrastate equity crowdfunding portal but on marketing the opportunities the portal presents.
Funding should be allocated to local chambers of commerce and community groups to market opportunities available through intrastate equity crowdfunding. Government officials tasked with promoting economic development should partner with community organizations throughout the state to highlight intrastate equity crowdfunding.
Policymakers can also foster the success of entrepreneurs by providing small incentives or rent subsidies to small businesses which open storefronts or facilities in local community. Instead of spending millions fighting to bring one large company into our state, politicians can use those resources to support a wide array of small and local businesses. This will allow residents to shop locally and circulate money back into the community.
Illinois politicians should rethink a strategy that is so reliant on providing lush incentives for individual, large companies.
Instead, they should focus on ways to support the small businesses that fuel our economy and at the same time, create community wealth. Luring large companies into Illinois with massive tax breaks creates headlines for politicians. Enacting policies that support small businesses creates opportunities and commerce in local communities.
• Elliot Richardson is president and co-founder of the Small Business Advocacy Council.