Obama Hints at Ending Capital Gains Taxes for VCs

The Obama campaign’s web site is suggesting that their new economic plan may be eliminating capital gains taxes for venture capital investors, a move that would surely be welcomed as VCs look for strategies that will carry them through a tough economy.

For cleantech startups, such a move could have an impact on freeing up investments, and could be particularly useful in light of the recent financial turmoil.

Dan Primack at peHUB spotted the wording in the campaign’s outline of its economic plan small business rescue plan.

Barack Obama believes that we need to encourage investment in small businesses to help create jobs and turn our economy around. That’s why Obama will eliminate all capital gains taxes on investments made in small and start-up businesses. Unlike John McCain, who wants to give $200 billion in new tax cuts to America’s largest and most profitable businesses, Barack Obama wants to cut taxes for the small businesses that create jobs but struggling with restricted access to credit alongside skyrocketing health care and energy costs.

Primack interpreted it to suggest that angels and VCs investing in early stages would likely benefit — provided Obama doesn’t also alter the tax treatment of carried interest from capital gains to ordinary income.

The National Venture Capital Association responded with a statement of cautious interest:

The zero capital gains rate for investment in small business is the most intriguing component and obviously would be favorable if it included venture investment but its too early to get excited – yet the direction sounds encouraging. As with all policy proposals, the devil is in the details as to how this would be implemented.

If true, the move wouldn’t just help cleantech startups secure funding; it might also dovetail nicely with Obama’s ideas on investing in alternative energies, such as a cleantech VC fund. Who knows if that wording will turn into action, but Obama is clearly making himself out to be a Silicon Valley ally and cleantech friendly.