[Photo of Michael D. LaFaive]

Michael D. LaFaive

Director of the Morey Fiscal Policy Initiative

Michael LaFaive is director of the Morey Fiscal Policy Initiative for the Mackinac Center for Public Policy, where he has worked since 1995.

He is the author or co-author of hundreds of essays, commentaries and blog posts and 12 studies on fiscal policy topics as varied as local and state privatization efforts, corporate welfare, school finance, state budgeting and cigarette taxes.

Among his studies is the Mackinac Center for Public Policy’s largest, a nearly 200-page state budget analysis that recommended more than 200 ideas for trimming some $2 billion from the state budget without cutting Medicaid or School Aid funding. Many ideas first presented by LaFaive in 2003 have been adopted or adapted by lawmakers in Lansing.

He is also the originator of the Center’s annual school privatization survey, which routinely garners a 100 percent response rates from districts. There is no database of competitive contracting like it in the United States. In addition to this product, LaFaive authored in 2001 a 26-page, full-color edition of Michigan Privatization Report specifically dedicated to fixing Detroit. The ideas in that publication are more relevant today than when it was published.

LaFaive is perhaps best known, however, for his cutting-edge, scholarly work examining state “economic development” programs. His studies and frequent commentaries on this topic have garnered him a national, if not international reputation as a respected government development critic and were probably influential in the decision to kill the Michigan Economic Growth Authority, the state’s high-profile corporate welfare program. 

LaFaive has been interviewed more than 1,300 times by the media in the last ten years. He is typically interviewed more than 125 times a year by members of the press seeking comment on fiscal issues and remains a popular public speaker.

He has undergraduate and graduate degrees in economics from Central Michigan University.

LaFaive is married and resides in Midland, MI.

Eliminate the Michigan Business Tax

Cigarette Taxes Fuel Rampant Smuggling

Extending Exemptions

Michigan currently provides a 100 percent income tax exemption for government retirement benefits, but the exemption is capped for benefits earned by retirees who worked in the private sector. … more

Gov. Snyder to Break Michigan's MEGA Habit

Although details are not yet clear, according to early reports Gov. Rick Snyder’s proposed Michigan Business Tax replacement appears to be good news for advocates of sound economic policy. … more

'Book Him!': Michigan Film Subsidy Scandal Leads to More Charges

A scandal first exposed by the Mackinac Center last June has led to a second set of felony fraud charges. … more

Four Cheers for Gov. Snyder

The first three weeks of Gov. Snyder’s administration has provided plenty to cheer, especially on fiscal policy issues. … more

Gov. Granholm Leaves Michigan to Find Work

Today is the 5th anniversary of Gov. Jennifer Granholm’s promise that Michigan residents would be “blown away” by the gobs of jobs her latest economic development program would create. How ironic then that she of all people would flee the state to find work… more

Projection: Repealing MBT and Surcharge Creates 120,000-plus Jobs

The first bill introduced in the Michigan House this year would repeal the much-reviled Michigan Business Tax 22 percent “surcharge,” and the first Senate bill would repeal the MBT altogether. Gov. Rick Snyder has proposed replacing the tax with a 6 percent corporate income tax, a change that would mean a big net tax cut for job providers. … more

GR Press Editorial Correct on Muni Spending

Applause is in order for the Grand Rapids Press Jan. 5 editorial “How to save money for local governments,” which correctly concludes that removing barriers to freer association between local units of government can cut costs. … more

Past State of the State Speeches Show Wide Variation in Proposed Government Expansions/Contractions

The Mackinac Center has tallied proposed expansions and limitations in each Michigan State of the State address since 1969. While not perfectly scientific, the exercise may provide some insight into an administration’s mindset. What do the past speeches tell us? … more

Sympathy for Politicians, Staff

As significant and real reforms and spending cuts are being discussed in Lansing, it’s hard not to feel a touch of sympathy for the “constituent services” staffers employed by lawmakers, and even for some of their politician bosses. … more

MBT Surcharge Repeal Could Create 27,900 New Jobs Through 2016

It’s probably no coincidence that the first bill (HB 4001) introduced in Michigan’s new Legislature is to repeal the 21.99 percent surcharge slapped onto the Michigan Business Tax in 2007. The surcharge is despised by the business community, and is seen as a job killer by policy analysts and politicians alike.  … more

Are Corrections Costs a Mystery?

A story in the Jan. 10 edition of the MIRS Capitol Capsule reports that, according to the National Institute of Corrections, Michigan spends more than $5,200 more to lock up a prisoner for a year than the national average. Also, nearly 29 percent of the state workforce is employed by the Department of Corrections, and it will absorb 23.1 percent of the current year’s general fund budget. This is hardly new information.
Not surprisingly, Gov. Rick Snyder and others are looking to lower those costs. … more

Michigan's Budget Problems Bigger Than You Think

Early indications are that our new governor is acting boldly and wisely in his attempt to right size Michigan’s fiscal ship. That’s good news, and he should be applauded, in part due to the fact that he will need the moral support. Why? The budget is in worse shape than even he and members of the media have probably fathomed. I’m not the first budget analyst to notice this, but I may be the first to say it out loud.  … more

Motor City Finance: Then and Now

Ten years ago this month the Mackinac Center mailed a special, 28-page, full-color, Detroit-specific edition of Michigan Privatization Report to editors across Michigan. We had recently completed a comprehensive review of the city’s budget, and were deeply concerned by what it revealed.  … more

We're No. 2!

In still-bad-but-not-worst-possible news, for 2010 — the first time since 2005 — another state (New Jersey) has beat out Michigan in the annual United Van Lines ranking of state outbound migration. … more

State Should Reform Public Act 72 of 1990

State Should Reform PA 72 of 1990

Michigan’s local governments face fiscal challenges in 2011. The state already has a pretty good policy in dealing with its local units as their finances are stressed, but this policy should be improved in a few ways so that local governments continue to be solvent as taxable property values fall and spending pressures increase. … more

Saginaw Fails to Repeal Prevailing Wage

Saginaw County officials have quietly buried a previously scheduled vote to repeal its “prevailing wage” ordinance for construction projects costing more than $50,000. Prevailing wage laws prohibit granting a government contract to the lowest bidder unless the company pays above-market, “union-scale” wages. … more

Scheduled Saginaw Prevailing Wage Repeal Vote Quietly Killed

Gov. Snyder Should Adopt HSAs for Government Employees

Cigarette Taxes and Smuggling 2010

Authors Michael LaFaive and Todd Nesbit update their 2008 cigarette taxes and smuggling study titled “Cigarette Taxes and Smuggling: A Statistical and Historical Review.” The update includes new statistical data to reflect the 27 state-level tax increases that occurred between January 2007 and the end of 2009 in Michigan’s 48 contiguous states. … more

Fieldstone Golf Course Should Be Sold

In a time of increasing pressure on local budgets, municipal managers should reach first for the lowest hanging fruit on the savings-tree: government golf courses. Let the slicing begin. … more

Tear Down This 'Film Industry' Facade

Ending the handouts would send a signal that this state is done playing games with ephemeral and failed "economic development" programs, and instead will focus on a real economic growth agenda, including across-the-board tax relief, labor law changes and other regulatory reforms. … more

MEGA “GlobalWatt” Deal Raises Questions

Pontiac Contracts With Oakland County Sheriff for Police Services

By contracting with the county to provide police services, the city of Pontiac will get a step closer to fiscal solvency. … more

Analysis: State of Embarrassment

State of Embarrassment

Citing companies receiving targeted tax breaks and subsidies has gone from an "economic development" victory lap to a series of embarrassing blunders. … more

MEGA Questions Surround GlobalWatt

MEGA Questions Surround GlobalWatt

Analysis: Republican Vows — Seven Lean Years Later

Republican Vows — Seven Lean Years Later

A PR stunt a few years back shows how "economic development" programs are really political development programs. … more

Analysis: Horse Racing Subsidies Fail to Win, Place or Show

Horse Racing Subsidies Fail to Win, Place or Show

If the state's political establishment thinks Michigan's adult population should have access to gambling, then it should remove the obstacles to other forms, not use that as an excuse to redistribute taxpayer dollars to a handful of players in a politically favored one. … more

Questionable MSU Scholarship Hurts Policy Debate

As revealed by the Mackinac Center on Wednesday, a school consolidation study by Michigan State University's Education Policy Center senior scholar Sharif M. Shakrani contained what appeared to be unattributed material (about 800 words) lifted from work that was not his own. The report received wide press coverage, yet it is the third study of questionable quality in 20 months from MSU-affiliated researchers, a pattern that has damaged the public policy debate in Michigan.  … more

Pay Attention to Candidates' Stance on Subsidies

When considering which candidates to vote for in November — regardless of the office — be sure to examine their stance on Michigan's growing empire of economic development programs, which selectively hand out subsidies and tax favors to politically favored industries and firms. … more

MEGA Careful?

Breaking News: Complaint Filed Against Hangar42 Principals

The Mackinac Center has obtained a copy of a lawsuit today filed by the attorney for 11 contractors hired to perform work on a building now known as Hangar42. You can read the complaint by clicking here… more

MEGA Careful?

How much background research does Michigan's corporate welfare bureaucracy actually perform on the potential recipients of its selective tax breaks and subsidies? Due to recent embarrassments the amount may be increasing, but until now the answer appears to be, "Not much at all." … more

Hangar42 Deal Shows Misguided Incentive Policies

The only way to avoid these problems in the future is to shut down the MEDC and the programs it administers. They don't work, are unfair and open to abuse.  … more

Editorial on Tax Subsidies Ignores Facts

The Grand Rapids Press on July 27 published an editorial defending state business tax incentives ("Michigan needs to keep offering business tax breaks to create jobs," July 27) that fails to recognize one vital argument: They don't work. … more

Let He Who Is Without Jobs Sin Cast the First Stone

An article in Saturday's Grand Rapids Press contains one of the most troubling quotes from an economic development official we have ever read. … more

Migration Troubling, Especially in Michigan

United Van Lines has released mid-year data on where it takes its clients to and from in the 48 contiguous states. Once again, Michigan finds itself in the number one position. … more

Tax Hikes Kill Jobs and Tax Cuts Create Them

Tax Hikes Kill Jobs, Tax Cuts Create Them

Analysis: MEDC Letter an Admission of Failure

MEDC Letter an Admission of Failure

On May 25, the executive committee of the Michigan Economic Development Corp. publicly cried foul over "unwarranted criticism" of the agency and warned that "political in-fighting" could hurt the state's business investment climate. But the criticism of the state's chief "jobs" department is not only warranted, it's overdue.  … more

Government Secrecy Rules on $10 Million Film Studio Subsidy

Hard-earned taxpayer dollars are being handed over by the state to these film studios, and when legitimate questions and concerns are raised the response from those in charge is, "Trust us. We know what's best for you." Voters and taxpayers shouldn't accept that, and neither should state legislators. … more

More Information Trickles Out Regarding Hangar42

Grand Rapids Press reporter Chris Knape continues to dig into the questions raised by the Mackinac Center about a potential $10 million subsidy for a film studio infrastructure project called Hangar42. … more

New Facts Exposed in Hangar42 Investigation

In following up on questions raised by an ongoing Mackinac Center investigation, Grand Rapids Press reporter Chris Knape added two facts to the pattern of information so far known about the proposed Hangar42 film subsidy deal. … more

Hangar42 Studios' Incentives Raise Questions

Film Noir

Taxpayers Are Not Sheep, Part II

People often respond to government-generated disincentives such as high taxes by voting with their feet, migrating to places with greater economic freedom and opportunity. … more

Taxpayers Are Not Sheep Lining up to Be Sheared

Notwithstanding the claims of many tax-friendly Lansing politicians and their government employee union patrons, it appears that taxation really does matter. … more

Bills Swap Selective Business Tax Breaks for Broad-Based Relief

A package of 17 bills sponsored by State Rep. Justin Amash would eliminate or reduce targeted business tax breaks in favor of across-the-board business tax relief. The idea is to minimize state interference in business by preventing government planners from handing out special favors to a favored few, while simultaneously granting a measure of relief to all MBT payers. After all, if tax cuts create economy- and job-boosting "incentives" for a few hundred firms selected by government "economic development" officials, won't lower taxes do the same the 100,000-plus firms who get no special treatment? … more

Michigan’s Gift to Texas? People

The Paying Class vs. the Government Class

Michigan’s Rank Position

There is no perfect method known for measuring a state's economic well being, or forecasting its future prospects. Nevertheless, over time many scholars using different methodologies have presented a relatively consistent picture: Michigan's economic performance and outlook have trended in a negative direction since their first reports. It's not hard to understand why: Lawmakers here continue to stifle growth with counterproductive policies. … more

Federal Reserve Study: Economic Freedom Matters

A new study published by the Federal Reserve Bank of St. Louis, called "Economic Freedom and Employment Growth in the U.S. States," concludes that there is a link between economic freedom and employment growth. Other studies have come to the same conclusion. One of the things that makes this one different is its findings on labor markets. The authors write: "In addition, we find that less restrictive state and national government labor market policies have the greatest impact on employment growth in U.S. states."
That conclusion doesn't bode well for Michigan, which is known for having a relatively hostile labor climate and which over the last 10 years has seen its overall national economic freedom ranking tumble. … more

State MEGA Audit Finds MEGA Problems

The Michigan Auditor General yesterday released a 72-page audit of the Michigan Economic Growth Authority program, finding that it is poorly administered. MEGA is the state's flagship "jobs" program, granting selective tax breaks and subsidies to particular firms selected to be "winners" by its staff.
The Auditor General's examination focused on reviews conducted by the agency that oversees MEGA. In other words, this was a review conducted to determine whether or not MEGA companies granted selective tax breaks have used proper "job count and salary information." … more

Michael Moore Inadvertently Makes Case Against Film Subsidies (Again)

Rick Lowe of the Nassau Institute posted a blog entry April 3 about his experience with a group gathered near his home in the Bahamas to watch and discuss Michael Moore's latest film, "Capitalism: A Love Story." … more

MEGA Marks 15th Anniversary

Yesterday marked the 15th anniversary of the creation of the  Michigan Economic Growth Authority, a business-tax credit and subsidy program designed to create new and keep existing jobs in the state. The Mackinac Center has published two rigorous analyses of MEGA: "MEGA: A Retrospective Assessment" in 2005, and "Michigan Economic Development Corporation: A Review and Analysis" in 2009.
Both studies found that the program had no impact on overall job creation in the state. Another study found that Michigan would have been better off economically if the state had just cut taxes for all businesses instead of operating a targeted tax break program. … more

Economic Development 'Chicanery'

The recent news that the state's Michigan Economic Growth Authority offered a convicted embezzler's company a $9.1 million tax credit has caused quite a stir in Lansing. Last week, legislators held hearings on how the Michigan Economic Development Corp., MEGA's parent agency, could have let someone with the embezzler's background be part of a multi-million-dollar selective tax break deal.
There is so much money sloshing around economic development programs around the nation — up to $50 billion or so as late as 2004 — that it would be surprising if there were not many questionable deals brokered by similar agencies across the nation. … more

Michigan’s Gift to Texas? People

A MEGA Blast From the Past

How deep does this hole have to get before the people demand that the political class finally turn its back on what are now clearly recognized are not "economic development" programs but a self-serving political development agenda? … more

MEGA Cliché 'Mistakes Were Made' Not Good Enough

In her first public statements since it was revealed that the Michigan Economic Growth Authority approved a $9.1 million tax credit deal for a convicted embezzler, Gov. Jennifer Granholm was quoted by the Gongwer Michigan Report as saying, "And obviously, a mistake was made, and it cannot happen again." … more

MEGA Prescient

The parole violation arrest last week of convicted embezzler and Michigan Economic Growth Authority tax credit winner Richard A. Short has caused deep embarrassment for state officials. But for me it has occasioned some poignant reflection on two former colleagues, Martin M. Wing, Ph.D, and Joseph P. Overton, who co-authored the Mackinac Center's first MEGA study in 1995, with a third scholar, before the program even became law. … more

MEGA Show Trial?

The Michigan House and Senate plan to hold hearings this week on how a convicted embezzler on parole duped the Michigan Economic Development Corp. and Michigan Economic Growth Authority into offering his company — which was being run out of a Flint mobile home park — a $9.1 million tax credit. (This could have become a "refundable" credit, meaning the state would likely be writing checks to the embezzler.) … more

This Just In: Convicted Embezzler's Business Awarded State Tax Subsidy

The Associated Press is reporting that a convicted embezzler currently on parole has been approved for business tax credits under the state's Michigan Economic Growth Authority program. The article also noted that when the deal was announced, the embezzler, Richard A. Short, "shared the stage" with Gov. Jennifer Granholm.
Had the program managers performed even a cursory background check, they certainly would have discovered Short's past. … more

Alice in Subsidy Land

Governor Offers $2.1 Billion Toast to Health of Government

Last week, Gov. Jennifer Granholm introduced the final budget of her tenure. She proposes spending $2.1 billion more than the current year, and requests a $554 million net tax increase for fiscal 2011. The tax hike comes from immediately increasing the tax burden on consumers by expanding the sales tax to services, while gradually implementing a reduction in business taxes.
This net tax hike would ensure the health of state government at the expense of families and business owners. … more

State of the Statists

Gov. Jennifer Granholm gives her last State of the State speech tonight.
Mackinac Center analysts have reviewed each State of the State speech dating back to 1969 and tallied the number of proposed expansions and limitations of government that each governor has offered. The "scorecard" of proposals below provides some insight into each administration's desire to see government solve perceived public policy problems.
These counts are not an exact science, but determining whether a proposal expands or limits state government is usually not too difficult.
Below is a set of historical averages covering the administrations of Governors William Milliken, James Blanchard, John Engler and Jennifer Granholm. … more

State of the State Tally

State of the State: Blown Away

Michael and Me and Taxpayer Makes Three

Half of Washington Smokes Expected to Be Illegal With Proposed Tax Hike

The state of Washington is considering an increase in its cigarette taxes by $1 per pack. As we've shown in our 2008 study on cigarette taxes, these tax hikes carry a large degree of unintended consequences. Increasing cigarette taxes is expected to ensure that half of all cigarettes smoked in Washington are smuggled in from other states.
In December 2008 we published a study "Cigarette Taxes and Smuggling: A Statistical Analysis and Historical Review." The study reviewed the efforts of states trying to fight the growth of smuggling, documented the history of cigarette taxes in Michigan, New Jersey and California, and modeled the level of illicit tobacco use in states due to cigarette tax rates. We recently updated the model to include changes to the Federal Excise Tax, as well.
The 2008 study already found that Washington has the fourth highest smuggling rate. In applying the model to the proposed tax increases, we found that a $1.00 per pack increase in taxes would jump the state's smuggling rates from 39.3 percent to 51.5 percent. … more

Price Theory for Legislators in One Lesson

Citizens, Investors and Legislative Circus Poodles

We all pay a price when government treats investors, entrepreneurs and households as circus poodles made to jump through hoops in order to collect selective tax-break or subsidy "biscuits" handed out at the whim and discretion of bureaucrats and legislators. … more

Blown Away by Former Detroit Mayor James Cavanagh's Ghost

As Detroit and the rest of Michigan look forward to 2010 and beyond, it might be wise to look back at what economics lessons the experience of the past half-century may provide to guide our future choices. … more

Why State "Economic Central Planning" Fails

Reams of empirical evidence indicate that when it comes to increasing the prosperity and opportunities of the people in a state, nation or society, government "economic development" programs fall far short of what their proponents advertise. Here are three of the reasons this is true. … more

Happy Birthday Dr. McCracken

Happy Birthday, Dr. Paul J. McCracken. … more

American Greetings Says Goodbye to Michigan

Just one day after Michigan Economic Development Corporation director Greg Main claimed that Michigan can look forward to a brighter economy next year,  American Greetings offered a stinging repudiation of his agency's failed "picking winners and losers" methodology with the announcement that it would close its plant in Kalamazoo. … more

Main Forecast: Hoping for a 'Broken Clock' Moment

In short, MEDC talk is cheap. Its officials can make wild claims about their ability to see the future or "create" jobs from thin air, but none are ever demoted or fired when they eventually prove to be divorced from reality. … more

Passing the Torch

Here's the latest evidence that so-called "economic development" programs are actually nothing more than political development programs. … more

Tea and Tourism Subsidies

Just one day after the 236th anniversary of the Boston Tea Party, Michigan legislators are preparing to divert a portion of today's sales tax revenue to provide a permanent subsidy for a particular group of business owners, Michigan's tourism industry. … more

Playing Favorites

In studies and blog posts, this author and others have argued that state "jobs" programs are really political development programs used by term limited legislators to advance their own political careerism by handing out special tax favors and subsidies to select corporate "winners," all under the guise of "economic development."
Consider Senate Bill 323, sponsored by state Sen. John Pappageorge, R-Troy. … more

Film Subsidies — Smokin'!

Does Michigan's film subsidy program encourage children to smoke? Will Michigan's workplace smoking ban put an end to smoking in movies made here? After all, isn't a film set a "workplace?" … more

Dear Tax Raisers: Please Tell Us Where to Cut

If You Build It, They Won’t Come (or Stay)

Mississippi Not Burning

Graduated Income Taxes Hurt State Growth

(Editor's note: This blog entry was originally posted Oct. 28, 2009. It is being reposted after Sen. Alma Wheeler Smith, D-Salem Township, a 2010 gubernatorial candidate, announced her plan to restructure Michigan's taxes, including a graduated income tax topping out at 9.35 percent.) … more

MEGA Madness and Big Labor Contradictions

Ironically, a special tax break offered by the state of Michigan to a for-profit arm of the Service Employees International Union was arranged in part to address the union's complaint that it is at a disadvantage due to Michigan's "high labor costs" compared to two other states the SEIU was supposedly considering (one of them with a right-to-work law reviled by the union). This according to a document obtained by Detroit News business writer Daniel Howes ("State tax credit to labor union is baffling," Nov. 20).  … more

Film Subsidy Is Political, not Economic

An unusual joint hearing occurring right now of two state House committees on Michigan's film subsidy program brought to mind a letter received last summer from Janet Lockwood, director of the Michigan Film Office. The letter was in response to a Mackinac Center press release describing how the subsidy program may actually destroy jobs. … more

State Legislators Need All the Facts on Film Subsidies

Dear Legislators: It has come to my attention that you will be meeting today to discuss the Michigan film incentive program. As you consider the testimony and documents presented by various parties, be advised that certain items with seemingly pristine pedigrees may be deeply flawed. … more

Politically Powerful Special Interest Gets Special State Tax Break

A business operation created by the politically powerful SEIU labor union will be granted a special $2 million tax break by the state of Michigan. … more

Dear Tax Raisers: Please Tell Us Where to Cut

If Michigan's governor and Legislature insist on taking more from families to solve the state's self-created overspending crisis, they should at least tell those families where to trim their budgets. … more