Qualified companies that create hundreds or thousands of Michigan jobs will receive tax incentives under bills approved by lawmakers yesterday, six years after Gov. Rick Snyder and fellow Republicans replaced such breaks with a scaled-back economic development program.
Snyder has been pushing the Legislature to approve the “Good Jobs” program this summer, hoping it will help persuade Taiwanese electronics contractor Foxconn to build a 5,000-employee display panel factory in the state. A decision is expected by early August, but as many as six other states may be in the hunt for the factory or other Foxconn projects.
Advocates contend that the new incentives, which will be capped at $200 million a year, are structured better than those Michigan used to offer and will help it compete with other states to land new, good-paying jobs. Critics argue that they amount to “crony capitalism” and come at the expense of individual taxpayers who also deserve breaks.
The legislation passed 71-35 in the House, with 40 Republicans and 31 Democrats voting in favor and 22 Republicans — including House Speaker Tom Leonard — and 13 Democrats voting against it. The Senate, which approved the legislation in March, sent it to Snyder on 29-5 and 30-4 votes.
Rep. Jason Sheppard, R-Temperance, said that in a “perfect world,” states would stand down and let companies base their decisions on other factors besides targeted tax breaks.
“However, we live in a reality world today where we are essentially in an arms race, not only with our bordering states but the entire country and world,” he said. “If we cannot equip our state organizations with consistent and meaningful tools to attract new industry here, to create jobs, we will always be at a disadvantage.”
Opponents said Michigan has no shortage of existing incentives and harkened to 2011, when the Republican governor and GOP-led Legislature slashed the business tax, eliminated tax breaks for individuals and ended economic development tax credits in favor of a small pot of grants and loans.
“We have a whole host of feel-good names for the same thing which we’ve done in the past and failed miserably, which is to give away individual taxpayers’ money to large corporations,” said Rep. Gary Howell, R-North Branch. “There is nothing in this bill that gives tax breaks to the struggling, hard-working small businesspeople of rural districts like mine.”
Businesses can qualify for the incentives in one of three ways:
- Creating 3,000 or more jobs that pay at least the average regional wage. They can keep all of the employees’ income tax withholdings for 10 years.
- Creating at least 500 jobs that pay the average regional wage or more. They can keep half of the income taxes for five years.
- Creating 250 or more jobs that pay at least a quarter more than the average regional wage. They can keep all of the income taxes for 10 years.
“Where I come from, a job paying $25.66 an hour would be a darn good job for many of my people," said Rep. Brian Elder, D-Bay City.
The Michigan Strategic Fund can strike up to 15 deals a year. No more than $200 million in incentives will be awarded — a provision that backers say distinguishes the program from the Michigan Economic Growth Authority program. It was uncapped and also aided automakers and other companies that kept existing jobs in the state, especially in the Great Recession.
Retail stores, pro sports stadiums and casinos will not qualify for the new tax breaks. Legislators will have to reauthorize the program if they want it to extend beyond 2019.
In June, Snyder said he had talked to a couple of companies or their consultants that were exploring Michigan as a place to add roughly 2,000 jobs apiece. A couple of others were looking to add about 300 jobs each, he said.
Snyder later traveled to Japan to meet with Foxconn, the biggest contract manufacturer of smartphones and other devices for Apple, Sony, BlackBerry and other brands. Foxconn Chairman Terry Gou has mentioned Michigan, Wisconsin, Ohio, Illinois, Indiana, Pennsylvania and Texas as manufacturing states with which the company hopes to work.