In recent decades, the age-old economic competition among the United States has turned into an economic battle for specific companies and jobs. It is a skirmish fought with targeted tax incentives, such as abatements in property or business taxes, offered to firms seen by government officials as particularly desirable for their ability to create jobs and stimulate broader economic growth.
Kenneth Thomas, a University of Missouri-St. Louis political scientist, estimates that the cost of U.S. state and local incentives provided to corporations every year is $48.8 billion in 1996 dollars (though his figure excludes incentives offered in Kentucky, due to a dearth of data). Thomas is not the only scholar to tally a figure of this magnitude. University of Iowa economists Peter S. Fisher and Alan H. Peters believe the annual value of state and local incentives distributed in pursuit of “economic development” exceeds $50 billion.
The Michigan Economic Growth Authority is Michigan’s primary tax incentive program. Established by former Gov. John Engler and the Michigan Legislature in the hope of fostering state job growth by encouraging specific out-of-state businesses to relocate to Michigan and specific Michigan businesses to expand here, the program’s 10th birthday is April 18, 2005.
State documents show that in the past 10 years, MEGA has offered business tax relief exceeding $1.8 billion to more than 200 companies in a total of 230 deals (the exact number of companies depends on how one counts subsidiaries and acquisitions). This is a substantial track record. It allows us to form meaningful conclusions about the program’s effectiveness as an instrument for stimulating Michigan’s economy.