MEGA Madness and Big Labor Contradictions

Dubious Michigan Tax Break to Union Raises Eyebrows

The Michigan Economic Growth Authority is a discriminatory tax credit program sold as a way for Michigan government to "create or retain" jobs here. This week it even offered a special deal to a for-profit arm of the Service Employees International Union. Ironically, the MEGA deal was offered 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). 

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Apparently lost on state officials is that labor unions exist to artificially raise labor costs by wresting higher worker pay from employers — regardless of whether the productivity of their union employees justifies the increased compensation. This is yet another example of Michigan's so-called "economic development" programs working at cross-purposes to the stated goal of expanding our economy.

Several years ago the Mackinac Center categorized the reasons listed by MEGA beneficiaries for considering locations in other states. The summarizing graphic below is instructive. A full 30 percent cited uncompetitive labor costs in Michigan — more than any other reason

Every time the state hands out targeted tax credits or subsidies to a particular business or industry, it is implicitly admitting that Michigan's costs for employers are too high. If that is true for a lucky handful of corporate tax-break recipients, it's also true for the other 100,000-plus Michigan job providers on the hook for the state's burdensome business taxes, including the Michigan business tax and its 22 percent surcharge.

Granting these "targeted incentives" is demonstrably a failed policy. Systematic research shows these "targeted incentives" don't work, but that hasn't stopped the state from picking ever more "winner" corporations as beneficiaries of MEGA tax break deals. It would be far better to eliminate the MBT and its surcharge for all Michigan businesses, thus making MEGA superfluous. The lost tax revenues could be easily replaced with any number of savings ideas advanced by the Mackinac Center.