MEGA incentives would have to continually increase to be competitive. The
cost of winning a subsidy contest with other states escalates sharply, and would require
ever-increasing tax incentives.
The costs of "winning" an industrial subsidization contest have risen
sharply. Michigan is a latecomer to the state-level strategic incentive competition,
having chosen not to compete aggressively during the 1980's, when the competition
intensified. In other states, the subsidy cost per job has increased dramatically,
culminating in Alabama's expense of $400 million, or approximately $270,000 per job,
needed to attract the Mercedes-Benz assembly facility in 1994. The city of St. Louis will
spend approximately $720 million to entice the Los Angeles Rams to relocate, after all
construction, concessions, and debt service costs are considered.
With MEGA, Michigan appears to be entering the contest a day late and a dollar short.
Even if selective incentives were effective in achieving net job growth, nothing would
prevent a competing state from simply increasing its own incentive to exceed the value of
the MEGA credit. Selective incentives will fail to make any appreciable difference, as
long as Michigan is competing from the position of having fundamental locational
disincentives such as high unemployment insurance and workers' compensation rates,
non-right-to-work status, and high tax and regulatory costs.