Tuesday, February 24, 2009

MEGA tax breaks for political pals in Michigan

The Michigan Economic Growth Authority was created in 1995 during Gov. John Engler’s administration. Somehow, it went off the tracks under a thick fog of secrecy and stunningly inept bureaucracy (what other kind is there?). The idea was to offer tax incentives to businesses to companies looking for a home, and in 1995, the targeted foes were Ohio and Indiana, which were both giving large tax breaks. It was voted in with a sunset provision of Dec. 31, 1998, which never happened. The Wall Street Journal in an editorial called MEGA, aptly, a “governor’s gimmick." Engler fired back with a letter to the editor: “Those who label MEGA as a vestige of "failed industrial policy" don't understand the reality of the marketplace and what it takes to succeed.”
Among the first companies to receive the break was Borders, which opened its first store in Ann Arbor in 1971. In 1995, its corporate hq was still in Connecticut. It wanted to come home. Would it have without a tax break? Most likely. Have you seen its latest performance reports?
Today, MEGA and tax breaks for businesses are the target of two bills that aim to shine a light on just who is getting these breaks and how. SB 71 passed the Senate 36-0. It requires an annual report from MEGA be given to the legislature to include “the amount of capital investment and the number of jobs required to be created or retained” by each business that enters into a tax break agreement with the Authority.
SB 72 requires the Department of Treasury to prepare and post on the Internet a list of every tax credit available under the Michigan Business Tax, and to submit to the legislature a report showing the number of taxpayers who claimed certain types of credit, including their names and addresses. This one also passed the Senate, 22-14.
Since Gov. Jennifer Granholm succeeded Engler in 2001, there has been concern that many of these tax breaks were given to pals of the administration and ignored smaller businesses because they did not cause headline-drawing job opportunities. The two bills pending in the state House would give citizens some idea of just who is not paying taxes and why. Most MEGA awards are political; at its last board meeting, MEGA handed out tax breaks – 100% for ten years - to Great Lakes Towers, a new wind turbine tower manufacturing company that has zero employees right now. Another recipient was Atwell-Hicks, LLC, a Land Development Consulting firm that is already based in Michigan. The tax break was handed over for its new alternative energy plant.
We can hope these bills will make it through so that more people can see the travesty that these tax giveaways are, and the bad business and political favoritism that MEGA is engaging in.

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