As the 2024 presidential election comes to a head, both major parties are focusing on economic policies—but neither has fully embraced the potential of investment crowdfunding to fuel local growth. Republicans continue to push for tax cuts aimed at stimulating corporate investment, while Democrats advocate for tax hikes on wealthy individuals and corporations to fund social programs. Yet both approaches miss a crucial point: the true engine of the U.S. economy is small business, and fostering local investment in these businesses could transform our economy from the ground up.

Sherwood Neiss, Principal at Crowdfund Capital Advisors, offers an insightful perspective: “On one end, we have one party using tax cuts to stimulate business growth, while the other uses tax hikes to create more opportunity. In reality, both should focus their attention on the segment of our population that represents the majority of businesses and creates nearly half of the U.S. economy—small businesses. Attention here would be a first in decades, refreshing in its approach and appealing to Main Street Americans. It would build a much stronger America than either party’s current plans.”

Why Investment Crowdfunding Matters: The Data

Our data analysis shows that Democratic districts are particularly benefiting from investment crowdfunding, outperforming Republican districts in significant ways:

• 2.67x more deals are launched in Democratic districts compared to Republican districts.
  • Why it matters: This shows that more entrepreneurs are turning to crowdfunding in Democratic districts to access capital, resulting in more business creation and innovation in these areas.
• For every $1 invested in a Republican district, $3.36 is invested in a Democratic district.
  • Why it matters: Greater investment volume means stronger local economic growth, with more capital being funneled into communities for hiring, expansion, and local spending.
• Nearly 3x more investors are found in Democratic districts.
  • Why it matters: This indicates broader community engagement, where individuals are financially supporting local businesses, leading to a more dynamic and resilient economy.
• 4.2x more jobs are created in Democratic districts.
  • Why it matters: Jobs are a direct indicator of economic health. These figures demonstrate how crowdfunding directly impacts employment growth, a vital component of local economic stability.
• Democratic districts experience 4.86x more economic stimulus.
  • Why it matters: This shows that investment crowdfunding creates a ripple effect, stimulating local spending and reinvesting in communities at a significantly higher rate than in Republican districts​​​.

What Current Policies Miss

Republicans’ emphasis on tax cuts primarily benefits large corporations, especially those in manufacturing, but leaves small businesses without direct support​. Democrats’ push to raise corporate taxes is intended to increase federal revenue for social programs but may reduce corporate investment, impacting job creation and wages​. Neither approach focuses on supporting small businesses, which according to the Small Business Administration make up 99.9% of all U.S. businesses and contribute 43.5% of the nation’s GDP​.

Investment Crowdfunding: A Policy Solution

Investment crowdfunding offers a unique solution that bypasses the need for broad tax cuts or hikes by directly empowering local investors to support their communities. To maximize its potential, policymakers should promote tax incentives that encourage more people to invest in crowdfunded businesses. Possible incentives include:

• Capital gains exemptions for investments in crowdfunded small businesses.
• Tax credits for reinvesting profits locally.
• Co-investment funds, where the government matches private investment to further boost local businesses. We discussed this in a policy paper recently.​

The 2024 election provides an opportunity for both parties to rethink their economic strategies. Rather than relying solely on corporate tax cuts or hikes, lawmakers should focus on investment crowdfunding as a direct means to stimulate local economies. As Neiss says, “Crowdfunding is not just a financial tool; it’s a pathway to economic resilience, diversity in entrepreneurship, and stronger communities,” says Neiss. “It’s time for the political conversation to catch up.”