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1) Sen. Bishop's "journal statement" [by Admin003 on May 26, 2005]Senator Bishop's statement is as follows:
I've enjoyed the open dialogue today regarding our Michigan economy and jobs. I want to thank everyone here for their open dialogue on the Michigan economy on ways to incentivize growth and our economy. As we all know, job losses and a declining economy do not discriminate between party affiliation or district number. They affect each and every one of us in this chamber today. We are all uniquely aware that during such difficult fiscal times, ensuring economic development and promoting growth become ever more challenging--yet important matter.
Despite the fact that Michigan possesses some of the nation's finest research institutions, we are suffering from the loss of our most educated and talented workers--the entrepreneurs who, in their own way, pull this economy together and create that entrepreneurial climate and grow businesses in this state. I know it has been difficult, but I am not here to try and paint a bleak picture or sing the blues about the Michigan economy. In fact, I would like to be a part of the solution, and I think all of you would like to be a part of it as well. We have offered legislation to facilitate innovation and foster an entrepreneurial climate within the state.
Entrepreneurs are the engines of innovation that provide the new jobs in the new industries that pull economies through periods of transition. In order to make sure that these entrepreneurs are a part of Michigan's future, we must be as aggressive as they are. All economic activity starts with an idea. But obtaining the investment and capital needed to advance their innovations and ideas and to move them to the marketplace is oftentimes the most difficult task facing entrepreneurs.
A vital source of early-stage investment is available from angel investors. These are high net worth individuals, usually accredited investors, who invest their own money, in companies at the early seed stages. Angel investors fill a critical niche by providing an estimated 90 percent of the seed and start-up capital in this country. But angel investors do much more than just provide funding. They provide expertise on the company's product, market, or management team. Many serve as active advisors or mentors for entrepreneurs, provide additional relationships in the form of networking to aid the business' growth, and supply industry and priceless entrepreneurial expertise. In short, angel investors have a vested interest in their investment.
Senate Bill No.92, as substituted, incentivizes and encourages this type of investment in the promising start-up companies in our state. As a logical result, the small businesses, the professors with the patents, and the software companies looking for homes will take a second look at Michigan, knowing full well that the private, early-stage funding is now available.
Already, other states have enacted legislation providing income tax credits for angel investors. Our neighbor to the south, for example, Ohio alone has tax credits which have been issued to investors who have pumped more than $45 million into 131 companies since 1996.
In addition to making Michigan competitive with other states for angel investing, this legislation is unique in several aspects. First, the credit is only available when the investor realizes a total loss from the sale or exchange of the investment; thus, it is contingent upon the failure and may never be used. Secondly, Senate Bill No.92 creates an investment board to authorize all credits to qualified businesses. It is also the responsibility of the board to provide a yearly audit on who received the tax credits, how much money was received, and exactly what type of businesses were invested in.
This brings transparency to the process, tracks program effectiveness, and it enhances the state's ability to improve the program and address emerging sectors in our economy. Today's economy is increasingly becoming characterized by scientific discovery, technological innovation, and the penetration of new and constantly changing markets. Without question, states with healthy and growing economies are those that promote--responsibly promote--strong investment in science and technology and the commercialization of innovations.
It is imperative, therefore, that we recognize that we are in competition with other states, not just other countries, for the time and talents of the entrepreneurs who will create businesses right here at home. We must encourage greater private sector investment in Michigan, and we can do so today by supporting Senate Bill No.92.
Reply
Senator Schauer, under his constitutional right of protest (Art. 4, Sec. 18), protested against the passage of Senate Bill No.92 and moved that the statement he made during the discussion of the bill be printed as his reasons for voting "no."
The motion prevailed.
Senator Schauer's statement is as follows:
As the minority vice chair of the Senate Commerce and Labor Committee, I rise to oppose the passage of Senate Bill No.92 today. As you may have noted, we needed to suspend the rules to take this bill up on final passage today, and I think the speed with which we are moving this bill and the following bill reflects and points to the fact that there are problems that need to be worked out with this legislation. While I support the concept of angel investing, there are a number of concerns that were pointed out in committee by the Treasury Department, not the least of which is a $10 million General Fund price tag of this legislation.
It was also pointed out that, as the previous speaker mentioned, at the heart of the bill is an income tax credit up to 20 percent of the taxpayer's total investment for a so-called bad investment. So this is someone who invests in an early-stage company. These are high risk investments, loses money, and they still get a 20 percent income tax credit.
Know that is the purpose of the bill, but it was pointed out by the Treasury Department that some individuals may, in fact, be better off by losing money and receiving the state tax credit than by some other investments or returns that they might receive.
So there are some conceptual problems. The price tag, I want to add, I mentioned $10 million, but if you combine that with the economic impact of the following bill, that's another $2 million--that is $12 million. We heard from the revenue estimating conference last week, and we've got real problems that we need to address with our budgets and revenues.
I think we should be holding this bill and working on this concept in conjunction with the Governor's bond proposal. I commend the majority party for their announcement yesterday on wanting to move that issue forward. One other point is the fact that this bill is not ready and the following bill is not ready. As well, Senate Bill No.525, which we will also be taking up momentarily, is a bill to fix a problem with a venture capital program that was set up. It was sponsored by the same sponsor of this bill. So we are having to fix that program a year or so later, and we are rushing this through which contains several problems.
So I would urge a "no" vote.
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I stole this from a comment by MCP-001 on similar legislation. It still applies:
"(T)he state's not good at picking winners and losers. We recognize that." - Governor Jennifer Granholm.
http://www.lsj.com/apps/pbcs.dll/article?AID=/20050412/COLUMNISTS07/504120330/1014/columnists07
Please tell me why they are still considering wasting out time and money, yet again?
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