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?

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.