Olympia: Don’t Crush Biotech With New Taxes
Washington’s economy is showing signs of recovery. But some major problems persist—unemployment is stuck at a historic high and healthcare costs continue to skyrocket.
The biotechnology industry can help alleviate both these problems. Washington is already a major hub of new biotech research and products. Boosting this sector will deliver our state—and our nation—from this economic slump. And if we don’t support it, others such as China and British Columbia are calling those of us in the investment community and asking “what can we do to get your investment dollars, and companies, to come here?”
We are at a crossroads. Do our state legislators want the high paying jobs, and thriving economy that comes with strong biotech, or will they force the research, startups, and investors away with inadvertent innovation-killing policies.
Life science companies directly employ more than 22,000 Washington residents, paying out over $5.3 billion in annual wages and contributing $5.7 billion in state GDP. This industry is a major producer of jobs in the state.
The creation of bioscience jobs has a ripple effect on the rest of the economy. For every new job within the industry, 3.4 jobs are generated somewhere else. The life science sector indirectly supports some 55,000 jobs here in Washington and 2.4 million nationally. In other words, it’s not just well-trained scientists that benefit when the biotech sector grows. Union construction workers, engineers and a host of other goods and service providers also gain from biotech’s success.
Washington is home to major international research institutions, including the Fred Hutchinson Cancer Research Center, the Bill & Melinda Gates Foundation, Seattle Biomed, the Institute for Systems Biology, and the University of Washington.
Bioscience also has a major role to play in reducing healthcare costs. Americans currently spend over $2 trillion a year on medical care. Lawmakers have been working tirelessly for the last year to devise a solution to this problem. But nothing will be as effective at lowering costs as sustained medical innovation.
Pharmaceuticals have long been known to drastically reduce costs. New medications have brought down the cost of treating depression by mitigating the need for hospitalization. Likewise, cholesterol drugs have saved our health system billions of dollars by reducing the need for heart surgery. And how much of the healthcare dollar do you think goes to branded pharmaceuticals? Four percent. Yes…only four percent. Pills that cure disease are cheaper than doctors and hospitals.
It’s no wonder that Lawrence Summers, President Obama’s chief economic advisor, recently noted that “over the long run, few issues are as important to a nation’s long-term economic security and global standing as being a leader in moving life sciences forward.”
And given Washington’s strong bioscience industry, this state is poised to play an integral role in helping the life sciences industry fortify our economy.
How does Washington’s life science sector compare to other states? It’s in the top ten for both research funding from the National Institutes of Health, and investment of bioscience venture capital.
There are a number of ways lawmakers can accelerate the growth of this industry. The most urgent and immediate issue is before the state Legislature right now. The Washington State House and Senate are negotiating final revenue bills that include massive increases in taxes on the life sciences industry and its research institutions.
If the State Legislature passes a bill like they did this week that almost doubles taxes on basic research in Washington (ESSB6143), this is a big problem for science and for jobs. If the State Legislature passes the proposed massive increases in taxes on investment income on foundations, research institutions, life science companies and venture capital investors, every venture fund will flee the state, and life sciences companies and research institutions will suffer. That would be the death of the industry. We need to make sure we have good policies in place that ensure researchers are incentivized to innovate and that cultivates a positive business climate for investment.
Thankfully, there are some State legislators and leaders, including Governor Gregoire, Rob McKenna, and others who understand the value of biotechnology and can put a stop to the inadvertent killing of the industry at the state level.
There are also issues at the federal level that must be addressed in order to ensure a vibrant life sciences sector. Hopefully, Congress will support sensible capital gains tax reform that will reduce taxes on investment in job-creating biotech investment, and not increase taxes as currently proposed.
With the right support and some restraint of innovation-harming policies, Washington’s biotech community will continue to generate jobs and revive the economy, while also saving lives with new products and driving down healthcare costs.