Job growth in the United States depends upon the availability of new capital. Money can come from the government or the private sector. Hopefully, many new jobs will be created by the stimulus package. But will large private venture capitalists put money where it is most needed to create new jobs anytime soon? Sadly, the answer is no.

The most difficult component of start-up company creation and small company growth is funding. Organized, institutional venture capital in the United States is venturesome by name only. The vast majority of venture funds invest in operating companies well beyond the start up stage. Institutional venture capital is risk adverse. In the current environment that aversion is exacerbated by the lack of public market "exits," like initial public offerings or sales to other companies; in addition large venture capital investments raise liquidity concerns while the money is tied up for longer periods.

America’s Fortune 500 companies, in the aggregate, have created no net new jobs in the past 30 years. According to most experts, start up companies generate more jobs proportionally than the rest of the private sector. The Kaufman Foundation issued a January, 2009 report in conjunction with the U.S. Census Bureau which confirmed the central role of start ups in new job creation.

The financial capital for start up and small enterprise comes from entrepreneurs themselves and from the individual or so-called, “angel” investor. “Seed” round investment comes from these angel investors and family and friends. These entrepreneurs will create new businesses for the new energy “green” economy, digital media, health care, information technology, and every other field imaginable — where they perceive opportunity.

So, here's my idea: zero capital gains for investment by individuals in start up and small enterprises. The zero capital gains treatment would be for individuals only with investments of any amount up to $250,000 in start up and small companies. I leave it to the tax policy wonks to determine the nuance regarding the use of funds from 401(k) or IRA accounts and the definition of small business.

This tax incentive would dramatically accelerate the growth of the economy and unleash the promotion of new ideas and new technologies which would both stimulate and benefit the nation. (Moment for disclosure: I have been an entrepreneur and active angel investor for over 25 years.)

Could it be enacted? It should enjoy broad bi-partisan support. It will generate new tax revenues from the ordinary incomes paid to employees in new jobs. It will ignite anew the innovative spirit. In my view, the proposal should grow net tax revenues through new jobs. It gets capital now sitting on the sidelines into investments that build a new economy, not just prop up faltering sectors.

There is some political momentum in this direction. During his campaign Obama supported reduction of capital gains for start ups and small business. The House version of the Economic Stimulus Bill is silent on the subject, while the Senate version has a short term (two year) reduction to 7 percent from the current typical 15 percent. It's probably too much to hope that the Conference committee will make such a move, and unfortunately too many Democrats have blinders on when it comes to tax policy. But we're getting there.