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San Diego Life Sciences Leaders Show Support for Governor’s Tax Changes

Xconomy San Diego — 

San Diego’s life sciences and biomedical communities showed their support today for California Gov. Jerry Brown’s tax plan, which he has offered as a way to promote statewide job growth by closing a “toxic tax loophole” and offering other incentives for companies to add jobs.

“The majority of Biocom’s members are smaller companies within Southern California, and those companies will realize benefits from each of the three components of the package,” Biocom CEO Joe Panetta (and a San Diego Xconomist) told the governor during a news conference today at Gen-Probe (NASDAQ: GPRO), the San Diego-based medical diagnostics company.

Brown welcomed the support, saying, “The folks in Washington from the President on down have been trying to figure out what to do about the economy.” In California, where statewide unemployment has been running at 12 percent, higher than the national average, Brown says it’s clearly important to stimulate the economy “by putting a foot down on the accelerator to create jobs” and “putting a foot on the brakes” for costly entitlement programs.

“The point is to have tax policy that encourages what you want and discourages what you don’t want,” Brown said. The governor, who proposed the tax changes just two weeks ago, said he wants to get two-thirds of the California legislature to agree to his three-point plan—and he was optimistic that can happen by the end of this week.

“This is not something that we talk about over months,” Brown said. “It would be days. It would be an example of how the two parties can work together in the face of the sorry spectacle that is taking place in Washington these days.”

Getting two-thirds of the state legislature to approve Brown’s proposal will require getting two Republican votes in the assembly and two in the state senate. Despite Republican resistance, Brown says that has to happen this week, before the legislature adjourns. “We seem to be picking up support in some conservative corners,” Brown said. “I don’t want to count the chickens before they’re hatched, but there’s a lot of cackling going on here.”

It was Brown’s first visit to San Diego since he took office in January. In addition to Panetta, Gen-Probe CEO Carl Hull and David Gollaher, CEO of the San Diego-based California Health Institute, joined the governor on the podium. Other San Diego business leaders were in the audience, including Bill Geppert, interim CEO of the San Diego Regional Economic Development Corp., and Camille Sobrian Saltman, president and COO of Connect, the non-profit group that supports entrepreneurship and technology innovation in the region.

Gollaher also voiced the institute’s support for Gov. Brown’s tax plan, saying it’s “refreshing” to hear a political leader as focused on jobs as the California governor. Yet with federal employment data showing that no new jobs were added in August, job creation has become more of a political topic de jour. President Obama is scheduled to outline his jobs plan before a joint session of Congress on Thursday, and Republican presidential hopefuls also have focused more specifically on job creation over the past week.

Still, Gollaher pointed out that the “life sciences is one of the industries where America still maintains its global leadership,” although other countries now clearly see the advantages of “high-wage, high-tech jobs that can compete across the global borders of the future.”

Gov. Brown has asked California lawmakers to change a 2009 tax rule that allows companies to choose between two tax formulas, which has put California-based companies at a disadvantage with out-of-state competitors. The rule allows companies to choose between a “double-weighted sales formula” that considers the company’s sales, property, and payroll—or they can use a “single-sales factor” formula based only on sales in California. Eliminating the double-weighted sales formula and using only the single-sales factor tax would require companies to pay more in sales tax if they sell goods in California but do not employ many California residents.

A Biocom official said the nonprofit trade association, which represents 560 life sciences companies throughout California, has supported the change for a long time.

Brown’s proposal also provides small businesses with up to 50 employees a $4,000 tax credit for each new in-state hire and offers companies a tax exemption for purchases of new manufacturing equipment.

“For our smaller and startup companies, perhaps the most significant aspect of the package is the exemption of equipment used in manufacturing or research and development from CA state sales tax,” Panetta said.

“In the life sciences industry, a single piece of equipment may cost tens or hundreds of thousands of dollars,” Panetta said. “Recognizing the costly reality of equipping a life science company, it is easy to see how a sales tax exemption of 4 percent for startup companies and 3 percent for others can translate into real and badly needed jobs.”

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