ANNAPOLIS, MD. (AP) - Gov. Martin O'Malley urged lawmakers on Wednesday to support his proposal for a $100 million tax credit program to help high-tech industries get start-up money in Maryland to generate jobs.
O'Malley usually appears before lawmakers to advocate for only one or two bills each session. He used this speech to two legislative panels to say that his Invest Maryland proposal could help businesses create thousands of jobs and inject hundreds of millions of dollars into the state's economy.
"Passing Invest Maryland might just be the difference between helping to grow the next MedImmune or Human Genome Sciences here in Maryland or watching it happen in another state," O'Malley said, referring to two high-tech Maryland companies.
The proposal allows insurance companies to pay tax liabilities at a discounted rate in order to replenish a state fund to provide venture capital for new businesses.
While 13 other states also used premium tax credits to spur investment, O'Malley's proposal would be unique because it would recoup 100 percent of the principal investment along with a percentage of the profit from successful business ventures.
Money to begin the program would be raised by tax credits through an auction process. Businesses seeking the credits would bid to get them, with 70 cents on the dollar being the lowest anyone could bid. It's hoped that will create a competitive environment for businesses to bid more to acquire the credits. That way, supporters say, the state will acquire the money to jump-start the program at the lowest cost of capital to the state.
The credits would not be available until 2015.
Christian Johansson, who heads the Maryland Department of Business and Economic Development, said the state will recover its investment to replenish the venture capital fund in the future. Johansson also said the legislation calls for hiring a third-party adviser to make sure the most innovative firms receive start-up money.
Brit Kirwan, chancellor of the University of Maryland System, praised the legislation. Kirwan told lawmakers that Maryland has some of the most intensive research and development in the nation on a per capita basis, but the state has lacked the early seed money to get economic ventures started from research already done in Maryland.
Julia Rubin, a professor at Rutgers University who is an expert on venture capital, said she was asked to review the measure several months ago. She said she supported the plan because the state turns tax credits into cash for venture capitalists, which makes the process more efficient. She also said the use of an auction process will maximize benefits to taxpayers and reduce costs. She also touted the part of the plan that treats the state and taxpayers like any private sector investor, because the profits are returned to the state by businesses that use the program.
"Overall, it is a very good program, and I do think it will become a national model if it is adopted," Rubin said.