It was great to see legislators refuse to pass any new business subsidies in 2025. But the state is still going to pay $533.1 million more to select companies this year based on deals made two decades ago. That’s not right, and that’s not how policy is supposed to work.

Michigan operated a selective business tax credit program via the Michigan Economic Growth Authority and made deals with companies from 1995 to 2011. Deals lasted for up to twenty years, and companies received refundable tax credits based on the number of people employed in facilities covered by the agreement. With refundable credits, companies can get cash payments from the state when they receive credits worth more than what they owe in taxes.

Indeed, the seven companies still getting MEGA credits receive large cash payments from the state. This year they are expected to collect $533.1 million more than they owe in taxes. With just two years’ worth of these credits instead being spent on more public purposes, lawmakers could more than catch up on the underfunding of the state police retirement system. These gigantic fiscal outlays are spending that goes without discussion or approval in the state budget.

That’s not how things are supposed to work. When legislators approve a budget each year, they ought to be free to determine what their priorities are rather than bound by the priorities of legislators long since out of office. Legislators are also not supposed to be bound by the decisions made by previous lawmakers. They are free to change whatever legislation they like.

Yes, the state should be able to make contracts and should honor its contractual obligations. Yes, legislators authorized administrators to business subsidy deals that can last twenty years. But this is a massive fiscal priority that skirts basic constitutional rules. And it’s not the only breach in basic government principles.

Lawmakers are also not supposed to make payments outside of the budget process. The state Constitution says that “no money shall be paid out of the state treasury except in pursuance of appropriations made by law.”

There is a brief section in budget bills that waives this requirement. It says that the budget authorizes money to pay refundable tax credits. The bills do not say how much is authorized or to whom, and this allows the $533.1 million to be paid to the seven companies with MEGA credits. This doesn’t sound like the way budgets are supposed to work.

It’s also not how tax policy is supposed to work. Taxes are supposed to raise revenue to operate the state government, but because of these selective refundable credits, Michigan operates a “tax” that gives some taxpayers other people’s money. The companies that receive MEGA credits are the only ones that file for the Michigan Business Tax. This year, the Michigan Business Tax is expected to pay its taxpayers $533.1 million more than they owe in taxes.

Nor are the goals of the deals something that policy ought to encourage. Lawmakers pay select businesses hundreds of millions in job retention deals. But lawmakers should not favor some companies at taxpayer expense. “The state can have no favorites, its business is to protect the industry of all, and to give all the benefit of equal laws,” as Michigan Supreme Court Justice Thomas Cooley put it.

On top of all these breaches in basic government principles, people cannot be told what each company collects from taxpayers. The state considers that confidential taxpayer information, even when the taxpayers in question collect hundreds of millions from the state. It continues to take this stand even when the state Constitution requires that all financial records and reports of public money shall be public records and open to inspection.

So laundering money through the tax system triggers an aura of privacy that prevents basic disclosures of where taxpayer money goes. Thankfully, a bill has been introduced to ensure that this information will be public.

Lawmakers inverted tax policy, skirted basic budgeting rules, refused to disclose their payments and ignored good government principles. It’s bad policy. And it continues to cost taxpayers.

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