Michigan Lawmakers Consider Repealing Business Subsidies, Erasing State’s Deficit
State lawmakers in Michigan are expected to propose legislation this week that would eliminate the state’s main business incentive fund, erasing the state’s budget deficit.
The Detroit News reported on Monday that, “The Michigan Economic Development Corp., the state agency that administers grants and tax incentives for businesses, is in the cross hairs of some lawmakers who have long viewed its programs as a form of corporate welfare.”
Payments for refundable tax credits awarded through MEDC “have ballooned from $75 million in the 2013 fiscal year to $681 million this year and an estimated $807 million in fiscal year 2016,” greatly exceeding the state’s budget deficit, which stands at $325 million for the current fiscal years and is projected to hit $532 million in FY 2016.
The MEDC has previously estimated Michigan’s long-term liability for business tax credits is $6.5 billion, but is expected to submit new estimates in advance of legislative hearings scheduled for later this week. (RELATED: States May Have to Disclose Business Subsidy Costs)
A significant portion of that liability results from deals the state has made with the “Big Three” automakers— Ford, Chrysler and General Motors. A Detroit News analysis of state records released last week found that the Big Three, “are entitled to refundable tax credits worth nearly $4.5 billion if they retain more than 86,000 jobs in Michigan through 2032.”
“Given the hundreds of millions of dollars that have been directed away from roads, away from essential services, we really can’t afford it,” Republican state Rep. Todd Courser, who plans to introduce legislation this week that would entirely defund the MEDC, told the Detroit News.
But Senate Majority Leader Arlan Meekhof, also a Republican, claimed that, “It’s not as easy as saying ‘Cut them off, we’re not going to do it anymore.'” (RELATED: NC Conservatives Resist Gov. McCrory’s Request for Business Incentives)
Indeed, the article notes that the tax credits, which have been handed out over the last decade in an attempt to spur business investment in Michigan, “are viewed as a contractual obligation by Gov. Rick Snyder’s administration.”
Courser, though, thinks the state’s fiscal dilemma should make Snyder more willing to consider reforms, saying, “I know it’s his baby, but I think it’s time to throw this baby out with the bath water.” (RELATED: McAuliffe Sets Record for Business Incentive Deals)
And MEDC is not the only corporate welfare program that could wind up on the chopping block this year.
According to the Mackinac Center, a conservative think tank, GOP lawmakers recently unveiled an “action plan” for the current legislative session that includes eliminating the state’s film subsidy program, which Republican leaders call “a poor investment of taxpayer dollars.”
The action plan asserts that film subsidies “cost taxpayers $193,333 for each job created in 2009,” and that despite the high expense, “there are fewer film jobs in the state overall than there were before the program started.”
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