Mass. State Sen. Richard Tisei, R-Wakefield
On June 16, 2008, Gov. Deval Patrick signed into law the Massachusetts Life Sciences Initiative. This groundbreaking piece of legislation commits more than $1 billion in taxpayer-funded subsidies to the life sciences industry over a 10-year period.
To provide incentives for job growth, research and development, the bill authorizes $250 million in tax credits for life science companies that promise to create jobs in Massachusetts and sets aside another $250 million for direct research grants. It also includes $500 million for construction and other capital investments within the industry.
As we mark the one-year anniversary of the bill’s passage, the state finds itself in the midst of one of the worst global recessions ever seen. Businesses are closing, jobs are being lost and the state is dealing with multi-billion-dollar budget deficits. Given the bleak economic outlook, with state revenues not expected to rebound to previous levels for another four to five years, it’s worth asking whether or not the state can afford to continue funding this ambitious, but costly, initiative.
During the recent Senate budget debate, I proposed a series of cost-saving amendments, including one to repeal the life science tax credits. Many people assumed this meant I don’t think the life sciences are worth investing in, but that is not the case.
In my mind, there has never been any question about the promise life sciences hold for the future. I believe the work being done in the industry today could one day lead to cures or treatments for many life-threatening and debilitating illnesses, including diabetes and cancer.
However, I also believe the state made a mistake in choosing to subsidize this one industry when so many other businesses across the Commonwealth are struggling to stay afloat. Retailers are about to get hit with a 25 percent increase in the sales tax and restaurant owners are facing an increased meals tax that could rise to as much as 7 percent under a local option. Why should we give a tax break to one industry when everyone else is being hit with a tax increase?
One of Gov. Patrick’s key selling points in getting the Legislature to support the bill was his claim that it would create 250,000 new jobs in 10 years. But data released this month by the Massachusetts Life Sciences Center proves these numbers were grossly inflated.
According to president & CEO Susan Windham-Bannister, the center invested $46 million in public funding during the first year of the initiative to leverage more than $357 million in private and federal investments, which “helped to create a projected 950 jobs.” While the initial returns on this investment are impressive, the number of jobs being created is nowhere near what Go. Patrick projected.
I also have concerns about how the $250 million set-aside for tax credits is being distributed. Any company the state classifies as a “certified life sciences project” can qualify for a tax incentive, but not all certified companies will actually receive this benefit. The question is, who gets the tax credit and who doesn’t?
The life sciences initiative has divided the industry into winners and losers. Many companies may qualify for the tax credit, but only a select few will get any money. This is unfair and will put some companies at a huge competitive disadvantage.
To add more transparency to the process, I filed language last year requiring the state to provide all certified companies denied a tax credit with a written notice explaining the reasons for the rejection. I also proposed “tax fairness” language to open up the tax credit to existing companies that maintain or expand their number of permanent, full-time employees in the Commonwealth. Both amendments were included in the Senate version of the bill, but dropped from the final version that reached the governor’s desk.
What really concerns me is that the state has chosen to single out a particular industry, when it should be implementing a broad-based economic policy that creates a more favorable business climate for all employers. What we should be focusing on are all the small, “bread and butter” businesses that employ 1.5 million workers across the state and create two-thirds of the new jobs in the Bay State.
Massachusetts already has a hard time attracting and retaining companies because of the high cost of doing business here. Perhaps if we turned our attention to lowering electric rates, reforming our highest-in-the-nation unemployment insurance rates, reducing employer healthcare costs and rolling back our corporate tax rate, we would be able to attract new employers from a wide range of industries — including the life sciences — and create the jobs we need to power the state’s economy and move Massachusetts forward.
The opinions, beliefs and viewpoints expressed above do not necessarily reflect the opinions, beliefs or viewpoints of MassDevice.com, the Massachusetts Medical Devices Journal, or the official policies of either.