One of the more intriguing races in Minnesota this fall concerns state District 40B in Bloomington, outside of the Twin Cities. There, Republican newbie Sanu Patel-Zellinger is challenging longtime Democrat incumbent Rep. Ann Lenczewski.
Patel-Zellinger is unlikely to unseat Lenczewski- you don’t get re-elected five straight times without knowing what you’re doing. But Patel-Zellinger’s campaign could bring a welcome debate on how Minnesota’s tax policies have helped or hurt the state’s ability to create innovative high tech start-ups, especially in medical technology.
As the longtime chair of the powerful House Tax Committee, Lenczewski has considerable clout over Minnesota taxes. Her steadfast opposition to the recently passed angel investment tax credits has infuriated many in the all important life science industries, something Patel-Zellinger’s campaign has taken note of.
“Thank you for your write-up in the MedCity News about the ways in which Rep Lenczewski has worked to undermine private venture capital investment in Minnesota,” Fred Zellinger, husband and campaign manager, recently wrote to me. “I recognize that America and Minnesota need to be leaders in high-tech industries to have a vibrant economy, and that the medical industry is now the cornerstone of that that.”
“My brother and sister both work at medical device manufacturers in the northern metro, and I am very concerned that poor public policy could upset the capital investment needed to move cutting edge technologies through long and risky product pipe-lines,” Zellinger wrote.
I took some time to chat with the Republican candidate, an eager if still politically untested woman in her mid-thirties. Born in India and raised in Nepal, Patel-Zellinger moved to Minnesota in 1991 and received her BA and Masters in Business Administration from the University of Minnesota. She has spent her entire career in business, having worked at Seagate Technology, Target Corp., and now Best Buy.
Patel-Zellinger was not particularly impressive on concrete policy and I found her unbreakable faith in the private markets a bit naive. But that faith, combined with her entrepreneurial zeal and business acumen, offers a worthy contrast to Lenczewski, an academic and old school Democrat who derided angel credits as “giveaways to the rich.”
Patel-Zellinger may lack specifics but she does possess an intuitive grasp of the challenges facing Minnesota’s high tech economy, a grasp that seems absent in Lenczewski’s mind.
“Do we have a talented pool [of workers] in Minnesota?” Patel-Zellinger said. “Yes. Do we have great healthcare? Yes. We got innovation in [medical] technologies that makes us great. We got the foundation. But we’re starting to derail it. We’re losing businesses to other states.”
Patel-Zellinger said the recently passed angel credits is a good example of how the government can use public policy to stimulate private innovation. But that’s not enough. She favors abolishing corporate taxes and capital gains taxes though she doesn’t say how to pay for it.
“We need to let investors to reap the benefits from the risks they are taking,” Patel-Zellinger said. “If we remove the incentives away from the people who’s willing to invest money, it makes it harder for them to stay here.”
It’s an argument I hear a lot these days from people like John Alexander, president of TC Angels, who believes potential angel investors flee to investor-friendly states like Florida instead of putting their money to work in Minnesota.
“Minnesota’s approach to taxing businesses is antiquated,” according to a report from an expert tax commission appointed last year by Gov. Tim Pawlenty. “It reflects a time dramatically different from today’s fast-moving, technology-driven and global economy. And Minnesota is paying a price in the competition for new jobs, economic growth and business investments.”
Among the tax commission’s major recommendations: eliminating the state corporate income tax and allowing a 20 percent exemption on income passed to individual shareholders in a S-corporation.
David Welliver, a member of the tax commission who recently founded the WellAdvised consulting firm, says the recent passage of the angel and research & development tax credits are a good start. But they’re relatively small potatoes compared to what he believes is the real problem: the corporate income tax.
Such taxes is why major companies like Medtronic Inc. (NYSE:MDT) and St. Jude Medical Inc. (NYSE:STJ) don’t build new plants or add jobs in Minnesota, he said, preferring instead to invest in lower taxed states like Texas.
Patel-Zellinger versus Lenczewski is not simply about Republicans versus Democrats. After all, it was Democrats like Sen. Kathy Saltzman and Rep. Tim Mahoney who successfully championed the angel credits in the legislature, even during years when no one cared about the issue.
No, this election should be about how we build upon their success. That’s why Patel-Zellinger’s campaign, inexperience and all, should be taken seriously.