MEGA 2 Hearing Demonstrates Desperation

New corporate welfare proposal gets hard sell in tax committee

Forty.

That is our count for the number of times a group of 14 lobbyists and a handful of Republican lawmakers referred to corporate welfare as a needed “tool” (or some variation thereof) at a state House Tax Policy committee hearing on June 14.

In this instance, corporate welfare means unelected bureaucrats at the Michigan Strategic Fund or Michigan Economic Development Corporation picking and choosing select large companies with at least 250 new employees to bestow up to $200 million in tax incentives over the next decade — foregoing revenue that would otherwise go to state government.

Advocates dismissed most criticism of the proposed laws, colloquially known as “Good Jobs for Michigan,” as merely philosophical or theoretical opposition. They regurgitated the same buzz words that accompanied the passing of Michigan’s prior major tax-incentive scheme, the infamous Michigan Economic Growth Authority program.

Perhaps the only thing more common than the utterances of the word “tool” during the testimony was the agreement that MEGA was indeed a failure, always followed by assurances that this package of bills was no MEGA.

“We don’t have a tool such as MEGA’s, and quite frankly, I’m not sad that they’re gone or that we stopped them,” said bill sponsor Sen. Jim Stamas, R-Midland. “We’re still paying though.”

MEGA, now being phased-out, was a multibillion-dollar program that doled out business subsidies. Taxpayers were on the hook for an estimated $1 billion in 2016. One tally indicates that only 2.3 percent of all MEGA deals lived up to their billing.

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Five scholarly studies have been done about the program over its life and four found a zero-to-negative impact. It’s no wonder Stamas and others worked so hard to distance this corporate welfare proposal from MEGA.

Furthermore, despite assurances to the contrary, previous Mackinac Center research demonstrates the old MEGA and the proposed Good Jobs for Michigan program share at least 12 instances of identical or near identical language and concepts. The only major difference is the mechanism by which fiscal favors to a favored few corporations will be delivered.

The proposal itself is another “jobs” program that stands on the shoulders of MEGA and other corporate welfare boondoggles across the nation. The Kansas PEAK program is perhaps most similar to the one being proposed in Michigan now. A 2014 study about PEAK found no evidence that program recipients created more jobs than similar businesses who had not received subsidies.

The proposed Good Jobs program should not be adopted. It is unfair to hand out goodies to those chosen by a handful of government appointees, and there is no data-based evidence (anecdotes don’t count) to suggest it would be effective.

Despite the four hours of testimony, not one person who asked for the state to provide an additional tool expressed any concern that it may not be an effective tool.

It seems to be assumed the proposed program will create jobs that otherwise would not exist — and that it would be costless, too. Not a single person testifying in favor of the legislation cited any study from any scholar on the subject as evidence that the new program would work as advertised.

Indeed, when pressed about a study of incentive programs by the Upjohn Institute of Kalamazoo, one guest simply dismissed the study as being philosophical rather than addressing any specific concerns. That seems to be the new talking point distributed around Lansing: proponents of corporate welfare dismissing criticism by arguing opponents are only philosophically or ideologically opposed.

The insinuation is that there is no practical reason for being opposed to such legislation. This is nonsense. There are loads of empirical reasons why lawmakers ought to be skeptical of this program.

One needs not to delve deep into Michigan’s past to find evidence that the state’s attempts to pick winners and losers in the marketplace has been ineffectual. The MEGA program, film subsidies and broadband deployment were all colossal failures of state incentive programs.

These alone should be reason enough not to try the state’s hand at more.

When is enough, enough? How many programs are needed to achieve jobs nirvana? How many individual deals must be struck?

No proponent of the Good Jobs for Michigan was interested in providing an answer to any of the above questions, while they seemed oblivious to the actual nature of job creation in the state.

The market has been creating jobs long before government officials ever presumed it was their responsibility to try to do likewise. It will continue to do so. Every quarter, Michigan gains and loses about 200,000 jobs, with slightly more gained than lost as of late. Michiganders accomplished this and reached a projected May unemployment rate of 4.2 percent without the Good Jobs corporate welfare scheme in place.

Businesses that receive special tax incentives represent a fraction of a fraction of the actual jobs in the state. Moreover, it is estimated at least 94 percent of businesses that received incentives would have remained in or relocated to the state even without tax incentives.

A better solution is to end all of the state’s incentive programs and return the money to the taxpayers who earned it in the first place. No special favors to special interests. After all, if tax cuts are good for a few select businesses and corporations, why aren’t they good for all of them?


Related Articles:

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Why did the Governor Flip Flop on Corporate Welfare?

‘But For’ Can’t Be Proved: Corporate Welfare is a Waste