Expert questions tax agency’s push for space launch taxes

One of the world’s leading experts on the commercialization of space questions the California Franchise Tax Board’s move to make the Golden State the first to impose state taxes on private space launch and tourism firms.

John Logsdon, co-founder of George Washington University’s Space Policy Institute, told the San Francisco Chronicle that the commercial launch business was heating up, with private “spaceports” as well as leased military facilities being use to send cargo and – before long – tourists in the state. 

The $2 billion in revenue that launch firms generated in 2014 worldwide is expected to continue to grow and make it a lucrative niche industry. Elon Musk’s Hawthorne-based SpaceX company is one of the world’s best-known space firms; a recent launch is pictured above. Vandenberg Air Force Base on the Santa Barbara County coast is considered a superior launch facility.

Against this backdrop, Logsdon questioned why California would seek to lead on space taxation: “States that don’t levy taxes would have that competitive advantage over states that do. If California puts in a tax and Florida or Texas doesn’t have a similar tax, I’m not sure that helps California in a competitive way.”

But Thomas Lo Grossman, the Franchise Tax Board official interviewed by the Chronicle, contended that the tax regulatory framework would actually make private launch firms more comfortable being based in California.

As a recent Quartz.com analysis noted, the state framework is what space companies prefer as the overall basis for taxation and hope it is copied by governments around the world.

“The complicated new formula … sets a tax rate based on how often rockets are flown from California. It uses the 62-mile trip to space as a standard, and reduces the levy on revenue earned in launches from other sites,” wrote space business reporter Tim Fernholz. “The new rules, based on formulae used for terrestrial transport industries, appear to ensure that a California-based company like SpaceX won’t be excessively taxed for revenue generated by launches in other states, while Colorado-based ULA pays its fair share for using California spaceports.”

Florida has already lured away California space venture firm

But unlike Quartz, the Chronicle report addressed Logsdon’s point about the business-friendliness of California becoming the first to levy a state tax in a nation in which a half-dozen states already have launch sites and many more are interested in building them. It noted that Moon Express – a well-financed venture capital firm that hopes to mine the moon for valuable natural resources – had relocated from Mountain View in the Bay Area to Florida. Company CEO/founder Bob Richards cited incentives proved by Space Florida, the state’s ambitious space economic development program.

California’s state efforts to promote space economic development are based with the Office of Strategic Technology in Los Angeles County – but space is only one industry the office seeks to help, unlike Florida’s more specific approach. Project California’s Council on Science and Technology also does some related work.

The Franchise Tax Board will consider adopting the rules after a public hearing on June 16. The board is taking comments on the FTB proposal until June 5.

 

8 comments

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  1. Dude
    Dude 10 May, 2017, 10:55

    The justification? California liberals are greedy phukz.

    Reply this comment
  2. Terry
    Terry 10 May, 2017, 11:24

    Another industry that will leave the so called GOLDEN STATE. The only think Golden any more is the fleecing of everyone here. But that is the communist way.

    Reply this comment
  3. Phil Hood
    Phil Hood 10 May, 2017, 11:57

    This is mind-boggling. I’m sure there are some technicalities to the story but California should be

    Reply this comment
  4. Mike in Fullerton
    Mike in Fullerton 10 May, 2017, 14:53

    Seems like CA is declining except along the coast and Bay Area. As a small business owner, you feel like the State Gov. is against you–FTB, Workers Comp, Slip-and-Fall lawsuits, 9 months of free rent to deadbeat tenants… I have started investing in rentals out-of-state and have been hiring a lot of people out-of-state.

    We seem to have a lot of people moving to California from other states. I talk to the homeless folks who hang out near my building. They have moved to California. Apparently it a good place to be homeless–they get food stamp money on a state issued credit card, and the cops don’t hassle them if they are smoking pot.

    If Dependency was classified as an industry, California would be #1in one industry.

    Reply this comment
  5. Mike in Fullerton
    Mike in Fullerton 10 May, 2017, 15:02

    I just got off the phone with the Auditor for California Workers Comp Insurance. If you do a paper audit, those jobs have been outsourced to Colorado from California. Probably because they don’t want to deal with stuff like California Workers Comp.

    Reply this comment
  6. Standing Fast
    Standing Fast 10 May, 2017, 15:32

    The lesson I learned from Milton Friedman is that if a State wants to discourage an activity, tax it. If you want to encourage it, don’t.

    Now, I’m kind of hesitant to get on the bandwagon for private space travel and exploration. So far, the launches tend to end in disaster. I can’t imagine why anybody would want to invest in something like this.

    Also, do you want to live near a private launch site? Not me.

    So, if California wants to tax private space launches, I’m all for it. But only if they abolish the Gas Tax first.

    Reply this comment
  7. Ultrawoman
    Ultrawoman 15 May, 2017, 15:53

    This seems unreal! This would have been pure science fiction at one time!

    Reply this comment
  8. NormD
    NormD 21 May, 2017, 13:54

    Its not that easy to move launches to another state. Launches must be over an ocean (in case the rocket fails). That rules out most states. Launching from Vandenberg has advantages for payloads that will use a polar orbit.

    You also have to consider how you get your rocket to the launchpad as well as the launchpad infrastructure (fueling, fire suppression, radar tracking, large areas, security, etc, etc, etc.)

    Moving to another country is a non-starter for many payloads.

    I suspect that whatever the taxes are they are far cheaper than creating a new launchpad in another state.

    Your simplistic analysis is lacking.

    That said, I am opposed to taxing the launches.

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Chris Reed

Chris Reed

Chris Reed is a regular contributor to Cal Watchdog. Reed is an editorial writer for U-T San Diego. Before joining the U-T in July 2005, he was the opinion-page columns editor and wrote the featured weekly Unspin column for The Orange County Register. Reed was on the national board of the Association of Opinion Page Editors from 2003-2005. From 2000 to 2005, Reed made more than 100 appearances as a featured news analyst on Los Angeles-area National Public Radio affiliate KPCC-FM. From 1990 to 1998, Reed was an editor, metro columnist and film critic at the Inland Valley Daily Bulletin in Ontario. Reed has a political science degree from the University of Hawaii (Hilo campus), where he edited the student newspaper, the Vulcan News, his senior year. He is on Twitter: @chrisreed99.

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