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Secret Subsidies Cost Michigan Taxpayers Billions

Michigan’s corporate welfare agency recently admitted it began withholding recipient information years ago after receiving “informal advice” that was never made public.

The Michigan Economic Development Corporation (MEDC) stopped disclosing the names of the companies it subsidizes in 2009, instead listing the totals by industry. It was not until recently, however, that the agency answered questions about what inspired the policy change, Michigan Capitol Confidential reported Thursday. (RELATED: ‘Oz’ Film Costs Michigan Taxpayers $40 Million)

In an email responding to questions posed a mere 12 weeks earlier by Michigan Capitol Confidential, MEDC Vice President of Communications Michael Shore said the agency decided to make the change based on “informal verbal advice” from the attorney general’s office.

That advice didn’t come out of the blue, though. Shore also confirmed in his email that MEDC had requested the ruling, but did not make either the request or the response public because “it was verbal.”

When the policy change first attracted notice, the agency said merely that it would no longer reveal the names of individual recipients because it was considered confidential tax information, but provided no details about how it reached that conclusion or whose opinion it was.

Several state lawmakers believe the MEDC should be compelled to provide full disclosure even if that requires a change in the law. (RELATED: States May Have to Disclose Business Subsidy Costs)

“Companies that take the money should have to agree to allow the information to be disclosed,” Democratic state Rep. Jeff Irwin told Michigan Capitol Confidential in March. “Otherwise how are we supposed to do any analysis? How are we supposed to know whether that money would be better used to fill potholes or do other things instead of using it for job incentive programs?”

Republican state Rep. Martin Howrylak agreed, saying, “on the argument that MEDC should be required to provide more transparency there really isn’t anyone who disagrees; it cuts across the political spectrum.” (RELATED: Michigan Lawmakers Consider Repealing Business Subsidies)

Before 2009, the public was able to view not only how much money was awarded to each recipient of MEDC subsidies, but also how many jobs had been created or retained as a result, allowing for a relatively straightforward interpretation of the efficacy of the state’s corporate welfare spending.

After the new reporting standards were adopted, and perhaps emboldened by its newfound opacity, the MEDC proceeded to rack up nearly $10 billion in unfunded tax credit obligations, much of it resulting from 20-year commitments to provide Ford, General Motors, and Chrysler with refundable tax credits.

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