As usual, bad ideas at the legislature just don’t seem to die. For the third year in a row, lawmakers have introduced legislation to bring back the Angel Investment Tax Credit Program (a.k.a. Shark Tank Bill), a scheme designed to subsidize risky venture capital investments in Arizona.

As was detailed in our opposition to the program last year, the Angel Investment program is very similar to the TV hit show Shark Tank, whereby wealthy investors listen to business proposals by aspiring entrepreneurs and then decide whether or not to invest in the venture.  The major difference is that under Senate Bill 1139, government employees at the Arizona Commerce Authority get to decide which ventures to support and then dole out tax credits to “qualified” wealthy investors.

In defending the program, supporters claim that tax credits are needed to lure venture capital to Arizona. This simply is not true. If a good idea exists, it will attract venture capital regardless of any tax credits offered. In fact, last spring the Phoenix Business Journal held a roundtable discussion and wrote a lengthy story on venture capital opportunities and discovered (not surprisingly) that the availability of equity is not the problem, but rather a lack of good investment options.

And even if it were true that there is a lack of venture capital available in the marketplace, it still would not justify having state employees deciding which investments deserve special treatment.

In the realm of risky venture capital investing, the experts (experienced investors) make mistakes all of the time—why would we think the Arizona Commerce Authority could do a better job? Either they will pick ventures that would have received funding irrespective of the tax credits offered, or they will subsidize bad ideas that should have never made it out of the starting block.

Simply put, taxpayers should not be in the business of subsidizing risky venture capital investments by wealthy investors. It’s a program that picks winners and losers among taxpayers, among venture capital investors, and among aspiring entrepreneurs.

Lawmakers should continue to stay out of the venture capital business and reject SB 1139.