Sunday, May 17, 2009

Tax Breaks Handed Out by Board With No Dissent, Few Questions

The Freep today does an excellent job on reporting the efficacy of tax breaks that are handed out in exchange for the promise of job “creation.” (we still struggle with that term – Nixon had it right in noting that sound business policy presents “job opportunities.”)
The story states, “...A six-month examination of the Michigan Economic Growth Authority tax credit program -- once described by Granholm as "the flagship of Michigan's economic development efforts" -- uncovered trends that raise questions about the incentives' effectiveness.
* A large percentage of the tax credits has gone to companies that later couldn't meet the job creation requirements.
When the Free Press tracked what happened to 195 of these tax breaks awarded by the state from 1999 through 2005, it found that 51% of these incentives had either never been used or were not used in recent years.
* Despite Michigan's efforts to diversify its economy, the auto industry has been a big recipient of the tax credits. Auto suppliers and automakers received 45% of the 195 tax breaks awarded by the state from 1999 through 2005.
* About 90% of the 491 total tax breaks granted since the incentive program began have gone to Michigan companies planning expansions rather than to out-of-state firms.
* In recent years, the state has expanded the incentive program by enabling more companies, particularly smaller tech firms, to qualify for the tax credits, primarily by lowering the job-creation requirements.”
FreeMichigan has discussed the Michigan Economic Growth Authority on several occasions, and we are happy to see our mainstream brethren checking things out. Reporter Katherine Yung did a terrific job.
This board is a rubber stamp for tax breaks. Review of its minutes for meetings since last June, which is as far back as the posted minutes go, shows not a single no vote with regard to any business before board.
This is not a system of checks and balance. Instead the board is packed with yes-men who apparently lack the instinct or courage to even question a petitioner’s request. Minutes also show that the governor periodically stops by the meetings to encourage and thank them.
We also note that Douglas Buckler, executive secretary/treasurer of the Michigan Regional Council of Carpenters and Millwrights (MRCC), serves on the board. As a union leader, we find this wholly inappropriate. Do you think that Buckler was simply the best choice for the board, despite what one could easily claim is a fealty to special interests, i.e. organized labor? In case anyone cares, Buckler in 2007 pulled in a salary/benefit package of $418,198, which included an expense account of $25,940, per the union's 990 tax form. Someone who is so beholden to an interest as such cannot perform what is demanded of a body dealing with our money.
Finally, let’s go back to November 2001, when the state and Pfizer announced the drug maker had received at least $70 million in state and local tax credits for expansion. It had threatened to leave Michigan unless it was given these breaks.
One news account reported, “The deal increases the odds that the company, Ann Arbor's largest private employer and largest taxpayer, will stay put and continue to have a significant impact on the state's economy.
The Pfizer expansion is the largest new economic development project announced in Michigan this year. State officials say it would pump more than $89 million and 988 jobs into the economy in the next 20 years.
At a news conference Tuesday in Ann Arbor, Gov. John Engler praised the Pfizer deal as a "welcome confirmation that Michigan is attracting the important companies and investments that will make the Life Sciences Corridor vision a reality."
The Michigan Economic Development Corp. on Tuesday granted Pfizer a 20-year single business tax credit worth an estimated $25.8 million. It also granted a 12-year, 6-mill abatement of the state education tax, valued at $10.7 million.”
Pfizer announced in 2007 that it would close its facilities in Michigan.
There is something very suspect about a board that operates with no opposition, no voice of dissent. But that is exactly what MEGA is doing. Is anyone going to do something about it?

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