The Life Sciences Bill is a poor tax policy proposal, even before the legislature gets its hands on it. The bill erodes the Sales & Use tax base, the Personal Income tax base, AND the Corporate Excise tax base. The credit created is refundable at 100% and doesn’t seem to have an individual cap or an aggregate cap. The state of MA will not only allow both people and companies to wipe out their entire tax obligations, but MA will subsidize their projects no matter how much any individual spends or how many projects claim the credit. With no aggregate cap or individual cap its very difficult to actually predict how much the tax base will be eroded, but it could potentially be huge.
Making the credit 100% refundable means that even if the project never becomes profitable, the company will still be able to take advantage of the state subsidization. Making the credit non-refundable and allowing a long carryforward period would ensure that MA will only be subsidizing projects that actually become profitable at some point. I understand that the credit will not be particularly useful to a start-up company with expenses far exceeding income in the early years, but why should the state be in the business of subsidizing never-profitable life science companies when a non-refundable long carryforward credit would ensure that MA only subsidizes eventually-profitable companies.
And defining life sciences as “advanced and applied sciences, including but not limited to, regenerative medicine, biotechnology, biopharmaceuticals, nanotechnology, and medical devices” is not the kind of tight definition that will restrict the program to only the types of projects that are originally intended. What are advanced and applied sciences? Is this an understood term in the industry or academic arenas? Does it include physics? computer sciences? engineering? Why is the list non-exhaustive? Why not create an exhaustive list to ensure that the program will be limited to the intended companies? What are medical devices? Seems like there is a lot of wiggle room in that definition. What are biopharmaceuticals? Are they different from regular pharmaceuticals? While Sen. President Murray is coming down hard on pharmaceutical companies to keep health care costs down for the citizens of MA, why is MA proposing to subsidize non-profitable biopharmaceutical companies with the money of MA citizens at the same time
The bill also bifurcates the administration between the Sec. of Housing and Economic Development and the Dept. of Revenue. My experience has been that often when an administrative agency is responsible for attracting “economic development” to a state by marketing to corporations that propose to bring in jobs, that agency might not be the best to put in charge of ensuring that a project will actually bring in the jobs. Its sometimes hard to say “come to MA for our great tax benefits aimed at companies like you,” then turning around and being properly thorough when it comes to evaluating the company to make sure it does all that it said it would do.
And this is all before the legislature even begins to earmark the newly created “Life Sciences Investment Fund.” Poor tax policy combined with a new fund for the lawmakers to play with. I think we need more obstruction from Speaker DiMasi on this one too.
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p>So Mr. Bialecki is going to wine and dine the execs from those “life sciences” companies (whatever that means) and he wants a tax credit to add to the sales pitch that he already has down. If a company decides that they will come to MA, then they put together their Life Sciences credit application and submit it to Mr. Bialecki. Gov. Patrick’s bill supposes that Mr. Bialecki will then take off his salesman hat and put on his economist hat to determine whether the company’s proposal will actually benefit MA. I don’t know him at all, but I can’t imagine that Mr. Bialecki will be anything but Mr. Rubberstamp at that point.
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p>The article also cites Dan O’Connell as saying that…
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p>There is no $25 million cap or any recapture provision that I could find in the bill proposed by Gov. Patrick. Perhaps Doug Rubin could clarify why the administration publicly favors these positions that it has not included in its own bill?
I missed it, the bill cites to a recapture provision in another credit. So thats one problem down. Now how about the many others?
Reading the bill language, it’s just too technical to easily or quickly parse. Probably, only a few lobbyist, aides and reg writing lawyers at DOR understand the mechanics.
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p>But that an annoying double standard! The Verizon pole exemption was a loophole and had to be stopped. So let’s take away Communication breaks and instead lavish them upon companies that make or sell “life sciences products”
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p>Why? Well duh, everyone knows life science products trump communication products, right?
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p>What are those life science products anyway? Maybe Incom’s fiberoptic microarray qualify. Maybe they’d be strung along poles from one lab to the other. Irony if Verizon’s poles are now taxable and Incom’s suddenly aren’t.
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p>The Communication industry was, politically speaking, the convenient tax evader. Life Sciences in the politicians’ mind, will provide good jobs, economic security, save the poor, feed the hungry….
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p>Sounds good too! Life Sciences, yum. And, while we’re at it, let’s skim some pork off the top, $50 Million to our cronies out west. Such bad policy: a bet with taxpayers’ money on a particular economic sector.