Making exceptions to general rules can seem harmless or even essential in the moment. When exceptions are made to achieve a short-term goal, the argument is that this one little violation of our collective standards or norms will quickly fade into history and everything will soon return to normal.
Life doesn’t always work that way. The first exception becomes a precedent, the basis for further exceptions, and before you can say “Jesse Ventura” it can become a norm. Casual Friday spread throughout the United States in the 1990s as an experimental employee perk. U.S. necktie sales peaked in 1995, and 21 years later the New York Post declared the necktie dead. It’s now impossible to tell a tech CEO from a high school slacker unless they’re both standing beside their cars.
Setting precedents matters. As a major directional shift in state tax policy, Senate Bill 564 sets a bad precedent for New Hampshire.
The bill exempts regenerative manufacturing businesses (those that manufacture organic human body parts) from state business taxation. That not being considered enough aid, it also creates a state “regenerative manufacturing workforce development program.”
The development program involves the state business finance authority taking over the student debt of regenerative manufacturing industry employees.
As President Obama would say were he a writer for this newsletter, let’s be clear. The target of the bill is Dean Kamen’s Advanced Regenerative Manufacturing Institute. We admire Kamen, and the ARMI project is an exciting, potentially pivotal development for Manchester’s Millyard. This biotech business could — could — be the celebrity anchor tenant Manchester officials have long sought: a magnet tech firm that finally turns Manchester into a center of tech innovation.
But no one can predict the future. Earlier this century, Kamen’s Segway was supposed to have been a transformative tech business, while Southern New Hampshire University was all but ignored as a small college in Hooksett. Today, SNHU is transforming the Millyard while Segway has moved to a small campus in Bedford.
In seeking to help this one company, SB 564 creates, for the first time, an economic development incentive for a specific type of business. New Hampshire has for decades firmly and wisely rejected this wasteful and costly tax policy that has wasted so much taxpayer money in other states.
Until now, New Hampshire has always been able to reject corporate requests for special tax breaks by noting that we just don’t do that in this state. Instead, we encourage economic development by keeping tax rates low for everyone.
This approach limits rent-seeking and keeps politicians from being able to distribute favors via the tax code to friends or politically favored industries. Allowing no exceptions to the rules is the only way to ensure equal opportunity for all, from the obscure and unconnected to the rich and famous.
SB 564 breaks with that tradition and grants favored status to a specific type of business. It seeks to justify this by predicting regenerative manufacturing’s benefits to New Hampshire.
“Regenerative manufacturing, the creation of new tissue for medical purposes, is an example of an emerging technology that will change current medical practice, advance the health of the citizens of New Hampshire and the United States, and create a new industry,” the bill states.
Any emerging medical technology could be described the same way.
The bill asserts that subsidizing this industry will lead to numerous benefits, including “providing new, high paying jobs…attracting highly skilled professionals… fostering the development of a new industry… contributing to the sciences… increasing tax revenues….”
Almost any emerging industry would bring similar benefits.
SB 564 not only grants favors that others will cite when seeking special treatment in the future, but it attempts to justify those favors with language that other industries can easily copy and paste into their own lobbying efforts.
With this bill, New Hampshire has waded blindly into the economic development incentive swamp. The economic research is quite clear that incentives are harmful at worst, useless at best. They don’t improve state economies. They do create two groups of businesses — insiders and outsiders. Insiders get state aid while outsiders are disadvantaged by having to subsidize their competitors.
This is not the New Hampshire way. By getting New Hampshire into the incentive game, the precedent set by SB 564 threatens to undermine the foundation of the New Hampshire Advantage.