Policy

Minnesota’s bioscience community benefits little from state’s high taxes

Credit for this blog post should really go to William Hoffman, an editor and writer […]

Credit for this blog post should really go to William Hoffman, an editor and writer with the University of Minnesota medical school and author of “The Stem Cell Dilemma.”

Hoffman e-mailed me after reading my post on how the Democratic candidates for governor rank on biosciences. He specifically focused on the idea that Minnesota’s  high taxes drives capital out of the state.

“Your point about taxes and keeping wealth in Minnesota in ‘Democrats running for Minnesota guv’  is well taken,” Hoffman writes.  However “when it comes to innovation in the biosciences, well, that’s a very complex business.”
Hoffman listed the country’s top ten biotech states, as ranked by Business Facilities. Then he noted in parenthesis how those states fared in favorable business tax environments, according to the non-partisan Tax Foundation.
Here’s what he came up with (I confirmed the data):

1. CALIFORNIA (48)

2. TEXAS (11)

3. PENNSYLVANIA (27)

4. MASSACHUSETTS (36)

5. KANSAS (32)

6. NEW JERSEY (50)

7. NORTH CAROLINA (39)

8. ILLINOIS (30)

9. MARYLAND (45)

10. OHIO (47)

So what can we conclude from this data? Well, for one thing, high taxes doesn’t always stunt economic growth, especially when it comes to high tech innovation. With the exception of Texas, all of these states don’t enjoy a particularly favorable business tax environment.

But more importantly, the evidence says the strength of the biotech industry is a direct result of  taxes, which, when coupled with generous bonding and strong state economic development authorities, allows states to invest billions of dollars of public money into these technologies.

For example, Massachusetts recently launched a $1 billion to back research and start-ups over a decade. California pledged $3 billion towards stem cell research while Kansas created a $581 million biotech investment fund. Ohio boasts the Third Frontier program and Pennsylvania has the Benjamin Franklin Technology Partners.

In other words, contrary to fiscal conservatives’ zealous faith in private markets, building a viable biotech industry takes public money, a lot of it. And where do we get this money? You guessed it…TAXES!!!!  Not just tax credits but actual state dough.

“State investment in public science makes a difference,” Hoffman said.  “The low tax mantra may serve retail and basic manufacturing well, but if you want knowledge-intensive industries in your state, you pay to play, including taxes.”

Which brings us to Minnesota. The state ranks 43rd in business tax environment, almost dead last, and fares relatively poorly in building a viable biotech industry.

When it comes to high tech innovation, Minnesota taxpayers get relatively little in return for their money. That’s because the state spends next to nothing on economic development. About 86 percent of the state’s annual budget goes to social services like healthcare, local government aid, higher education, and public schools.

Read a little deeper and the data proves a point I’ve long argued: Minnesota is mooching off the success of  its past, preferring to rely on legacy Fortune 500 companies like Medtronic Inc. to pay its bills instead of helping to create the companies (and taxpayers) of the future.

Conservatives and liberals alike need to wake up. Cutting state budgets and vaguely “reducing bureaucratic red tape” won’t create a bioscience industry. Neither will jacking taxes on the wealthy. The question is about priorities: you have x amount of dollars. So how are you going to spend it?

Angel credits and science and technology authorities are great but unless we get real serious in spending state dollars, bioscience in Minnesota will remain nothing but a pipe dream.

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