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.

The completion of the Space Shuttle’s 135^th and final mission reminded many of us here in the Golden State that Edwards Air Force Base in Southern California was the shuttle’s primary landing site in its first decade of operation.

In the shuttle program’s second and third decades, Edwards was relegated to a secondary role as the Kennedy Space Center in Cape Canaveral, Fla., the shuttle’s home base, became NASA’s preferred site not only for shuttle launches, but also landings. Indeed, the only times Edwards saw action was when there was bad weather off the Florida coast.

California’s limited role in the shuttle program was not simply an insult to the state’s scientific and technological prowess. It also meant that the Golden State was a bit player in the space industry, which contributed $4 billion a year to the Florida economy, while accounting for more than 40,000 jobs.

That’s why last week’s retirement of the Space Shuttle fleet could prove a boon to California. For, after a half century on the periphery of the nation’s government-driven space program — from Mercury to Gemini to Apollo to the Space Shuttle — the Golden State could very well find itself at the forefront of a brave new era of commercial space activity.

Indeed, the commercial space industry, which in 2009 generated more than $200 billion in U.S. economic activity, according to a report by the Federal Aviation Administration’s Office of Commercial Space Transportation, could one day become a pillar of the California economy.

It certainly has as much promise as such still-developing industries as biotechnology and green energy, which have enjoyed favorable tax and regulatory treatment by the state government, as well as generous financial support by the state’s venture capital community.

Lifting Payloads

The first big opportunity for private space companies is to develop crew-carrying spacecraft that can deliver a payload to low-Earth orbit at considerably less cost per pound than NASA’s Space Shuttle was ever able to achieve.

Space Exploration Technology Corp., a Hawthorne-based company created by EBay co-founder Elon Musk, could become the first company to bring such a spacecraft to market after a successful demonstration last December of its Falcon 9 rocket (shown in the above picture) and Dragon capsule.

The spacecraft was launched into orbit 185 miles above Earth and circled the planet twice before its reentry and recovery. SpaceX estimates that its spacecraft can make such trips for $1,000 per pound, compared to $10,000 to $15,000 per pound for the Space Shuttle.

That makes the California company’s spacecraft the leading candidate to ferry NASA astronauts and cargo — as well as those of other space-going nations — to and from the International Space Station.

Meanwhile, Moon Express, a Silicon Valley start-up, has plans to send robotic spacecraft to the lunar surface to explore the potential for mining precious materials, including platinum group metals, rare earth elements and Helium3.

Such mining is at least decades away, but the R&D that will go into getting a spacecraft to the Moon, mining precious materials and returning the cargo back to Earth will yield unforeseen commercial spin-offs along the way. That’s one of the dividends of America’s half century in space.

Space Tech

In fact, many commonplace products and gadgets taken for granted today were originally developed for space-related purposes.

Like the ear thermometer, developed by San Diego-based Diatek Corporation, with the help of NASA’s Jet Propulsion Laboratory. And protective paint, used to coat the Golden Gate Bridge, among other structures, originally was developed to shield launch structures from salt-air corrosion, rocket exhaust and thermal stress.

And invisible dental braces jointly created by Costa Mesa-based Ceredyne and Monrovia-based 3M Unitek in 1987, using a compound — translucent polycrystalline alumina (TPA) — developed with impetus from NASA Advance Ceramic Research.

These are but three of the thousands of innovations that are byproducts of space-related R&D. And any number of those innovations have been brought to market by California companies, like Diatech, Ceredyne and 3M Unitek, generating economic activity within the Golden State and creating jobs.

For much of the past half century, Florida has been the unchallenged hub of American space activity. Not because its universities turned out the best scientists and brightest engineers; nor because the tech companies clustered on Florida’s so-called Space Coast were more innovative than those in any other state.

But because the Sunshine State was protected from meaningful competition by NASA’s exclusive dominion over U.S. space activity.

When the shuttle completed its final mission last week, it signaled the end of the government’s space monopoly and the dawning of the commercial space age. And as California companies have dominated the computer age and dominated the Internet era, our homegrown companies should  similarly dominate in space.

— Joseph Perkins