Subsidies Bad For Taxpayers

Bills considered in Lansing would have favored select businesses

Publicly funded economic development incentives rarely deliver on promises made to taxpayers, according to Mackinac Center’s Assistant Director of Fiscal Policy James Hohman.

Lawmakers in Lansing considered a number of bills that would have offered select businesses incentives on the promise that those companies would create jobs. As Hohman explained to CMU Public Radio, such promises often fail to materialize.

A couple of studies have looked at that in cities that have passed these programs in trying to see if the programs are able to justify their cost. That’s where we find that these programs just do not fit their promise of creating jobs, attracting talented people and supporting the tax base. In fact, they cost taxpayer dollars.

Two of the proposals – one that would have offered $250 million in tax abatements to companies promising to create at least 250 jobs, and one that would have redirected up to $50 million annually in state tax revenues to mixed-use projects that develop “brownfield” sites – could have followed in the footsteps of Michigan’s MEGA tax credit program, Hohman told The Detroit News. Those incentives are expected to cost Michigan $6 billion through 2032.

I’m disappointed lawmakers are going to authorize new business tax credits when they’re still not done paying for the old ones.

Hohman told the Associated Press that targeted subsidies enable lawmakers to give favors to businesses of their choosing without holding them accountable to the promises made. He suggested ending existing programs like this, not creating more.

An editorial published by the Iron Mountain Daily News agreed that lawmakers should be skeptical of such proposals.

At a time when the state regularly pleads poverty, we join Hohman in questioning how effective this initiative really would be. …

Giving away big chunks of taxpayer money to develop or keep jobs is dicey on its best day. We trust Lansing decision makers are aware of that fact.

Thanks to the leadership of House Speaker Kevin Cotter, R-Mount Pleasant, and House Local Government Committee Chair Lee Chatfield, R-Levering, plans for these giveaways were halted.

Read the Associated Press article here.

Listen to the interview with CMU Public Radio here.

Read The Detroit News article here.

Read about the outcomes of the bills here.