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MEGA would be a massive realignment of Michigan tax policy, with total projected SBT revenue reductions of $640 million even if the program is sunset in 4 years.
The costs of the MEGA plan in terms of lost SBT revenue are deceptive. Proponents of the plan frequently speak in terms of "initial year SBT revenue reductions of $7-10 million." However, if one assumes a credit authorization that would result in a mid-range estimate of $8 million in initial year credits, and that it applies for the full 20 year term, the total revenue lost by that single year's authorization is $160 million. The total credits authorized in the next four years alone would amount to $640 million.
The actual progressive impact on annual SBT revenues can be seen in Figure 1. Again assuming that credits are authorized each year to create an $8 million initial year credit, the total SBT revenue forgone in the second year would be $16 million, $24 million in the third year, $32 million in the fourth, and so on until the credit is terminated. After termination the amount of revenue forgone would either stabilize and later decline, or decline immediately, depending on the number of creditable years remaining.
