MEGA Promises

The Governor is under pressure from certain Michigan businesses and economic development professionals to respond to the incentives for business expansion and relocation offered by other states. Michigan employers receive targeted appeals from other states touting a business-friendly environment, often in terms of right-to-work laws, low unemployment insurance and workers' compensation rates, a reasonably priced skilled labor force, and a lower overall tax level.

MEGA is intended to make Michigan a better competitor against other states using strategic industrial subsidization. The Jobs Commission, based on a PHH Fantus Consulting report, has identified seven primary competitors for new job expansion: Alabama, Indiana, Kentucky, North Carolina, Ohio, South Carolina and Wisconsin. These states offer some of the most substantial economic development incentives in the nation. MEGA provides Michigan with a strategic tool to compete in incentive contests with other states, and purportedly supplements Michigan's improved overall business climate as an attraction to investors.

MEGA incentives are also supposed to protect existing jobs against predation by other states, symbolize a favorable attitude toward business activity, and encourage plant expansions that create new jobs in Michigan.

The proposal issued by the Jobs Commission claims the following benefits of MEGA:

1. It is revenue-neutral, funded with future revenue growth from investments that would not have occurred in Michigan, and actually generates more state and local revenue than is forgone.

2. It emphasizes expansion of Michigan-based firms.

3. It encourages business diversification by providing benefits to manufacturing and non-manufacturing firms of all sectors, except retail.

4. It levels the playing field between Michigan and other states and provides the ability for all Michigan communities to compete for investments.

5. It creates no new bureaucracy.

This report takes issue with several of these claims.