Mackinac Center Hosts Corporate Welfare and Special Interests Working Group

Scholars from think tanks across the country visited the Mackinac Center in late March to discuss corporate welfare and other policies that may harm economic growth and development.

The working group shared recent research and other materials in the field, described forthcoming products and considered opportunities to educate lawmakers and the public on superior policy alternatives.

For the uninitiated, “corporate welfare” is a catchall term for policies that — through one mechanism or another — shower fiscal favors on relatively few and often politically well-connected businesses and industries. These financial favors come at the expense of all other taxpayers and can include direct subsidies, tax credits, tax abatements, low-interest loans and tax increment financing schemes. In addition to being unfair, they’re expensive and the most scholarship on the topic shows that such programs are ineffective.

The Mackinac Center for Public Policy has been a state leader in making these facts public. Indeed, its first economic development study was published in 1989. Since then, it has published two full, scholarly analyses of the state’s Michigan Economic Growth Authority subsidy program, one on state tourism promotion subsidies and another on the 21st Century Jobs Program. It has also published hundreds of other commentaries and policy briefs on the subject.

Leaders from think tanks across the country discussed their own original research on their states’ film subsidy and tax increment financing programs, “Quick Action Closing” funds and more. While the amount of research done by think tanks is impressive, scholars at universities and other organizations are also publishing on the subject, and most are finding little to no positive impact from these expensive government operations.

Despite all of this evidence, lawmakers, including those in Michigan, continue to take up legislation that falls under the corporate welfare rubric. It seems sometimes that lawmakers are impervious to facts. After all, they continue to adopt and expand these programs in most (though not all) states.

Overcoming the incentives politicians face to embrace corporate welfare programs in the face of their poor track record and expense was a major theme of the working group. The think tank leaders discussed ideas such as creating a state compact whereby legislatures agree to not pilfer industry and businesses from other states using these programs.

Politicians defending corporate welfare programs often say, “We can’t unilaterally disarm” by eliminating the program, but working group participants have never heard any of them call for a multilateral disarmament conference. That is the idea behind the compact.

In addition to addressing corporate welfare programs, the Mackinac Center’s working group also examined other policies that can thwart economic growth. These include occupational licensure laws, Certificate of Need programs and territorial monopolies granted to well-connected special interests. All of these policies restrict free association and thwart economic growth and development — and not always to protect public safety, which is often how they are sold to the public.

Finding the most effective ways to address the shortcomings of such policies is the reason for starting a working group. This group is off to a good start and readers of IMPACT can expect to hear more about its work.