Tax Credits Could Save 2000 Jobs

October 15, 2002
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KALAMAZOO — Legislation passed by the Michigan Senate recently could provide Pfizer Corp. with enough incentive to retain 2,000 Pharmacia Corp. jobs in Kalamazoo.

House Bill 6073 amends the Single Business Tax Act, allowing an eligible taxpayer to claim a credit against the tax for qualified research and development expenses.

The bill is critical not only for the Kalamazoo area, but for the entire state because the tax credit could be used as a tool to lure future investment dollars and assets for research and development to Michigan, Sen. Dale Shugars, R-Portage, said in his address on the Senate floor.

“I have never seen a more important piece of legislation so timely for Kalamazoo and Michigan in my 12 years of public service,” Shugars said.

Under the bill, the total of all tax credits could not exceed $10 million in any single tax year.

The Senate Fiscal Agency estimates Pfizer would qualify for the maximum $10 million credit each year beginning with the 2003 tax year.

On July 15 Pfizer Inc. announced it was acquiring Pharmacia in a stock-for-stock transaction valued at $60 billion.

Their consolidation, which is expected to be consummated in November, creates a global pharmaceutical company with an expanded research and development program and “a product portfolio unequalled in depth and breadth,” according to Pfizer.

As Shugars pointed out, Pfizer will be making decisions about cutting back drastically on research and development activity in Pharmacia’s two Michigan operations, as well as operations in four other states.

The concern is that Pfizer might eliminate jobs in Kalamazoo and move them to a company location in another state where applied tax credits translate into a lower cost of doing business.

The credits available to Pfizer under HB 6073 would be comparable to those offered in other states where the companies have research and development operations, according to Shugars.

Twenty-two other states currently offer research and development tax credits similar to HB 6073.

“If we don’t have research and development, the cure for diabetes, the cure for AIDS, the cure for a lot of these diseases won’t occur,” he stressed.

“And if Michigan doesn’t step up and save some of these jobs, I do not want to be a senator that sits here and does nothing to protect 5,000 research and development jobs in the state of Michigan.

“I think if you’re running for office, it would be much better to try to save jobs and bring investments to the state of Michigan instead of trying to boot them out of here.”

The legislation awaits Gov. John Engler’s signature.           

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