SB 527, “Life Science Development Act”, has once again resurfaced from the depths of buried legislation. Similar legislation was proposed in the 2009-2010 and the 2010-2011 sessions, failing to go anywhere each time. Indeed, the 2009 version was also the recipient of a Bad Bill of the Week award.
Yet here it is again.
It is sponsored, this session, by Senators Hartsell Jr. (R – Cabarrus), Brunsetter (R – Forsyth), Clodfelter (D – Mecklenburg) and Rucho (R – Mecklenburg).
Its seemingly harmless and humanitarian purpose is to encourage investors to invest in the life sciences: “The General Assembly finds that life science companies generate employment opportunities for the state, expand local tax bases, and engage in the discovery, development, and commercialization of new pharmaceuticals, biologic products, medical devices, and diagnostic products.”
Sounds great, right?
Read a little closer.
This bill intends to create a risk-free investment vehicle for private investors to invest in “life science” companies. Investors will be promised a certain rate of return, and will receive a state tax credit (i.e. bailout) to make up the difference if the rate of return falls short of what was promised.
In other words, private investors would get to keep all the profits themselves, but taxpayers would be forced to cover their losses.
While masquerading as an attractive proposal to create jobs and expand local tax bases, this bill only privatizes profit while socializing risk.
And think about how risky these investments must be if only a guarantee of complete financial security will result in private investors putting any money toward these life science companies. This bill is necessary because no private investors (including members of the General Assembly) are willing to risk their own money on these companies.
So what is the sponsors’ solution? Risk the taxpayers’ money instead.
This bill puts taxpayers on the stick for bailing-out highly risky investments for wealthy investors and that’s why SB 527 gets this week’s Bad Bill of the Week award.