October 18, 2013

Why Should County Taxpayers Fund Private Medical Research?

Jackson County’s ballot proposal for a medical research tax to raise $800 million over 20 years has had a controversial reception. The proposed tax is intended to fund research on “translational medicine,” which turns existing scientific research into marketable drugs, medical devices, and diagnostic tools. The Pitch recently wrote an excellent summation of different viewpoints on the tax, including those of Show-Me Institute Chairman Crosby Kemper III.

Supporters of the tax leave a few questions unanswered: Why a county-level tax? Supporters cite lack of federal research funds as an impetus to look for more local funds, but sales taxes typically fund public assets such as parks or public safety projects. The half-cent tax would make Kansas City’s already high sales tax rate one of the highest in the country. Do other local governments fund this type of research with specific taxes?

I could only find two comparable taxes: one in Johnson County, Kan., and one in Rochester, Minn. (If anyone knows of other like taxes, please share them in the comments.) Even these two taxes have very important differences, however, from the Jackson County proposal.

Voters in Johnson County passed a one-eighth-cent sales tax in 2008 to fund the Johnson County Education Research Triangle. The money went toward building facilities at Kansas University and Kansas State, as well as to some researcher salaries. Jackson County’s proposal, however, would divert more than half of the revenue to private medical institutions: $20 million to Children’s Mercy and $8 million to St. Luke’s Hospital.

In 2012, voters in Rochester extended a half-cent sales tax that devotes $20 million in bonds (approximately one-seventh of the revenues) to the “Destination Medical Center” (DMC). The Destination Medical Center is the Mayo Clinic’s 20-year, $5 billion project to upgrade its own facilities and the surrounding area’s infrastructure and amenities.

Importantly, the Mayo Clinic initiative uses mostly private funds for the venture — more than $5 billion in Mayo Clinic’s own funds and those of private investors. The $500 million that the state, city, and county pledged over 27 years are primarily for infrastructure and transit improvements, which are the sorts of things public tax dollars typically fund. Additionally, state funds are contingent upon private investment occurring first. Mayo Clinic President and CEO John Noseworthy said in an interview:

We are not asking for a handout. We’re asking for nothing upfront. We’re not asking the state to fund the medical facilities, the science facilities and so on as other states are doing for our competitors, by the way. We’re simply asking for, once we have grown and proven that growth, to have some of that tax revenue infused into the public infrastructure.

Jackson County voters, unlike those in Rochester, are facing a different request. The translational medical research tax is a unique proposal that taxes citizens to fund buildings and salaries for researchers at primarily private institutions, in a field that private investment traditionally funds.

Being on the cutting edge of implementing new and higher taxes is not the right kind of innovation for Kansas City.

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