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
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 Policy 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
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
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.