A case study
Taxpaying businesses in Michigan no longer live in constant fear that their tax dollars will be awarded to their competitors. It didn’t just happen overnight.
The Overton Window of Political Possibility is a model to explain how changes in public policy occur. When evaluating the options within any specific public policy issue, only a relatively narrow window of options will be considered politically acceptable by politicians. The window of acceptable policies is not primarily defined by the politician’s preference, but by what he or she can support without jeopardizing re-election. As society embraces new ideas, the Overton Window shifts to include additional public policy options that were previously deemed unacceptable.
The Mackinac Center has long expressed concerns about economic development programs that award taxpayer dollars to businesses favored by state bureaucrats. One program, the Michigan Economic Growth Authority (MEGA), exemplified the flaws of a department, such as the MEDC, that picks winners and losers in the private market.
2012: Gov. Rick Snyder issued an executive order dissolving MEGA. In a press release he emphasized his intention to “move away from credits” awarded to private industry.
2009: The Mackinac Center published a full study about the ineffectiveness of the Michigan Economic Development Corporation, highlighting MEGA’s negative effect on manufacturing jobs: “For every $1 million in tax credits actually earned by MEGA companies, 95 manufacturing jobs were lost in the counties where the recipient firms were located.”
2009: Mackinac Center’s Michael D. LaFaive published a policy brief criticizing MEGA’s lack of transparency. The brief described difficulties in obtaining records and data from the agency.
2005: On MEGA’s tenth anniversary, the Mackinac Center published a study authored by Fiscal Policy Director Michael D. LaFaive and Adjunct Scholar Michael J. Hicks that found MEGA failed to deliver on its promises and had been unsuccessful in improving per-capita income, employment and the unemployment rate. The study found that through 2004, more than 200 firms had been offered more than $1.8 billion in Single Business Tax relief. Only one short-lived construction job was created for every $123,000 in tax credits offered.
1999: A Mackinac Center Op-Ed discredited MEGA’s exaggerated claims to have created over 74,000 jobs.
1995: Despite the initial resistance, Engler soon prevailed. The Michigan Economic Growth Authority Act established a tax incentive program. One of the early tax credit recipients was Waldenbooks — better known as the (now belly-up) bookstore Borders.
1995: Gov. John Engler proposed a Michigan Economic Growth Authority that would hand out tax breaks to select businesses. The Mackinac Center published a study arguing against the “New War Between the States” that would serve up tax benefits to businesses seeking to relocate. Legislators delivered the governor his first legislative defeat over the MEGA program. Critics predicted the Mackinac Center would soon go out of business due to our position.
1992: The Detroit Free Press reported that Gov. John Engler and Gov. Jim Edgar of Illinois attempted to dissuade other governors from using targeted tax incentives to attract businesses across state borders.