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.

Is That a Road or a Chinese Checkerboard?

The $787 stimulus plan signed by President Obama Tuesday allocates $64.1 billion for transportation and infrastructure projects, with $27.5 billion aimed at highways and bridges. The question many have is why states and municipalities have allowed roads to deteriorate at such a pace. Most municipalities have road crews and budgets for such. Leaders are supposed to know and plan for problems. The roads we drive on are part of our quality of life. Third World countries are known in part for their poor roads and infrastructure.
The incredibly depressed state of Michigan is by far the biggest offender in allowing its roads to sag. Drivers here are amazingly docile about the horrendous condition, even holding a contest to see who can find the biggest pothole.
The problem allows a lot of finger pointing but no solutions. And it has a history.
In 1991, then-Gov. John Engler promised to funnel $78 million in road funding to towns and counties. He later rescinded the funding amidst his usual political game playing. In October 1995, the Grand Rapids Press in an editorial promised that in the wake of a defeated gas tax measure, roads would suffer. Higher taxes, it reasoned, would surely make things right.
The state raised its gas tax to 19 cents in 1997 with the promise of good roads in the future: According to an AP story in July 1997, Rep. Clark Harder, D-Owosso, said the public won't see the results of the tax hike immediately. "If we can get another $20 million to $40 million into this year (for road repairs), we'll be doing well," said Harder, a chief negotiator on the road plan. "A year from now people will be saying, `Thank goodness the Legislature did something about this."'
The gasoline tax increase is expected to raise about $200 million a year for road repairs.
Other elements of the road repair package include a 30 percent increase in truck registration and weight fees for $42 million; a one-time, $69 million dip into the state's Budget Stabilization Fund; and a plan to pave the way for reforms that might include the state taking control of more primary roads from local governments.
Michigan Department of Transportation spokesman Gary Naeyaert said the $69 million the state's rainy day fund will pump into road repairs this year will still leave a lot of the work for the years ahead.
Wrong. In a recent interview on WJR, listen to MDOT flak Rob Morosi do the dance.
(BTW, Naeyaert is now head of Naeyaert Advocacy Group, a lobbying group in Lansing)
This is how political promises work, my friends. And don’t be surprised to see other elements of the stimulus plan fail as well.