Yet the jobs announced in these releases are conjectural; at the time a MEGA deal is approved, no one knows whether the jobs will actually be created. This is why MEGA tax credits, though offered, are withheld until the jobs and investment actually occur.

A 2005 study published by the Mackinac Center for Public Policy reviewed publicly available MEGA data. The authors found that of the 127 MEGA agreements that should have produced fully employed facilities through 2004, only about 56, or 44 percent, were actually able to generate enough jobs and investment to claim MEGA business tax credits. Just 10 of the 127 MEGA agreements — 8 percent — had actually met their employment promises within the expected time frame.[*],[86] Ultimately, of the 35,821 jobs that had been expected from these 127 deals, only 13,541 jobs actually existed, or about 38 percent of what had been projected. These jobs represented just 0.3 percent of the roughly 4,672,000 jobs in Michigan at the time.[87]

The numbers above are similar to those generated by Detroit News and Detroit Free Press reviews of MEGA jobs data. In 2003, a Detroit News investigation by Mark Hornbeck found that between 1995 and 2000, MEGA deals had generated approximately 10,787 jobs.[88] In 2009, Katherine Yung of the Detroit Free Press spent six months collecting and analyzing data on 195 MEGA program deals between 1999 and 2005. The article, titled "Promises to Create New Jobs Fall Short," explained that more than half of the deals examined "were not fully utilized or never used at all ..."[89] Yung reported that throughout MEGA's 14-year life (a longer span than that considered by the original Mackinac Center estimates), the MEGA program had created just 24,000 jobs. These figures were provided by the MEDC, but it is unclear how they were calculated.

Two caveats should be added about MEGA's direct job creation figures. First, the Michigan Office of the Auditor General has never performed an audit of these figures. Thus, it is not known whether the MEDC is ensuring their accuracy. If the MEDC is relying primarily on employers to report these job totals, it is essentially accepting at face value the claims of people who face a significant financial incentive to overestimate. In that case, our 2005 calculation that MEGA projects created more than 13,000 direct jobs from 1995 through 2004 would be too high. The same would be true of the figures produced by The Detroit News and the Detroit Free Press, which also relied on MEGA reports.

Second, MEGA deals are based explicitly on the assumption that without the tax credits, a company would not locate its new jobs and investment in Michigan. Still, there is no way to know for sure. Companies might have, in fact, ended up in Michigan regardless of whether they received MEGA tax credits, since business location decisions are sometimes more nuanced than a few sentences on a MEGA agreement form might suggest.[†] If a company would have located in Michigan regardless, then MEGA's tax credits have not created new jobs — or at least have not created as many new jobs as the facility's direct job count might suggest.


[*] After the 2005 study was published, several of the 10 companies, including Kmart Corp., made job cuts. Kmart filed for bankruptcy less than 17 months after it was awarded its second MEGA deal. Michael LaFaive, "MEGA Promises Versus MEGA Realities," Mackinac Center for Public Policy, http://www.mackinac.org/7006 (accessed March 15, 2009).

[†] For a detailed discussion of several companies’ location decisions, see the discussions of Walden Book Company Inc., Compuware Corp. and Owens Corning in Michael D. LaFaive and Michael Hicks, “MEGA: A Retrospective Assessment,” (Mackinac Center for Public Policy, 2005), 44-46, http://www.mackinac.org/7054.


[86] LaFaive and Hicks, "MEGA: A Retrospective Assessment," 22.

[87] Ibid., 22-23.

[88] Mark Hornbeck, "Tax Breaks Shortchange State: $1.4 Billion Business Program Gets Minimal Payback in Jobs," The Detroit News, September 2, 2003.

[89] Katherine Yung, "Promises to Create New Jobs Fall Short," Detroit Free Press, May 17, 2009.