Sen. David Hoyle (D-Gaston), along with co-sponsors Sen. Daniel Clodfelter (D-Mecklenberg) and Sen. Clark Jenkins (D-Pitt), submitted the N.C. Life Science Development Corp. Act (SB 580) under the auspices of it creating jobs and expanding the area’s tax base. The wording of it gives the appearance that it would entice new industry to the area by engaging in “the discovery, development and commercialization of new pharmaceuticals, biologic products, medical devices and diagnostic products.”
What the bill would actually do is force already struggling North Carolinians to help subsidize a risk wealthy investors want to take. SB 580 establishes an investment company focused on financing life science companies, guaranteeing a rate of return for investors. If the rate of return is not met, the difference will be made up by providing tax credits to investors.
Such an arrangement is similar to Fannie Mae and Freddie Mac in that it privatizes profits while socializing risk. This will encourage investments in very risky entrepreneurial endeavors – those that wouldn’t be approved in the marketplace. The issuance of tax credits to investors would in actuality narrow the tax base, placing even further pressure on average working North Carolinians to shoulder a greater share of tax revenue to the state. The only return that would be seen would go to investors. If private capital markets deem these companies not worthy of investment, why should taxpayers shoulder the burden and assume the risk? Taxpayers could be on the hook propping up unprofitable companies that have no hope of success or viability. That is not a prudent use of scarce taxpayer resources.