MIDLAND - Tax breaks granted yesterday to two Michigan companies underscore the need to eliminate a controversial government jobs program, according to the Mackinac Center for Public Policy.
The program, the Michigan Economic Growth Authority (MEGA), gives business tax breaks designed to be a "job expansion incentive," but Center researchers found that the program's benefits go primarily to counties that already have the state's lowest rates of jobless workers. MEGA gives companies in high-unemployment counties little or no help to shift jobs to their communities.
Researchers at the Mackinac Center analyzed 4 years of Michigan Jobs Commission data and found that 60% of MEGA tax credits went to companies locating or expanding in counties with unemployment rates below the state average when the credits were granted.
Tuesday's MEGA tax credits totaling nearly $16 million to Select Steel Corporation and Steelcase Incorporated will help them build new facilities in Eaton and Kent counties, respectively. Both counties have unemployment rates more than a full percentage point below the February state average of 4.6%.
The total estimated value of all MEGA-related tax credits, abatements, grants, and other benefits is more than $500 million since the program's inception, according to Mackinac Center Analyst Michael LaFaive. He calculated that over $40,000 in local, state, and federal government giveaways and tax credits are granted for every job the Jobs Commission predicts will be created directly by MEGA.
LaFaive questions whether the state should be selectively helping certain firms create jobs in counties where unemployment is already at record lows. "We're not suggesting that MEGA be converted to a welfare program for unemployed workers, but we are saying MEGA certainly should not be a corporate welfare program for companies in counties with the strongest economies."
LaFaive also challenges the claim that MEGA creates jobs at all. "We do know that MEGA shifts jobs from one company to another when it offers tax incentives to companies that expand or locate in Michigan. MEGA companies get new workers, but where do they come from? Were they trained and gainfully employed by other job providers, or were they unemployed and sleeping on grates until their MEGA jobs came along?"
Jobs Commission officials have long claimed that the basis for their job-creation predictions is a computer-based economic model at the University of Michigan. Edwin S. Mills, a Northwestern University professor said about the model used at U of M: "It is a complex computer model that lay people cannot understand or evaluate.. Thus, the frequent government claim that the best scientific model available shows that x thousand jobs will be created by the project helps to carry the day."
LaFaive does not blame companies that accept the tax incentives. "Businesses have a responsibility to their owners and shareholders to pursue legal tax advantages. But they would also benefit from policies that reduce the tax burden on all businesses and not just select ones."
A politically appointed board selects the firms that will receive multi-year, multi-million-dollar MEGA tax credits. Until April 5, the program was housed in the Michigan Jobs Commission. It was then transferred to the Michigan Economic Development Corporation, a semi-public entity.
The Mackinac Center for Public Policy, a Midland-based research and educational institute, has been critical of MEGA since its inception in 1995. In a study that year and another report issued to lawmakers last January, the Center called for the program's elimination saying it was unnecessary, counterproductive, and discriminatory.