Michigan House Passes Economic Development Incentive Package

by Scott McClallen


After Michigan lost out on an $11.4 billion electric vehicle factory estimated to create 11,000 jobs, the GOP-led House passed a trio of economic development bills on a 83-21 vote.

But 16 Republicans and five Democrats voted against the package, saying it amounts to a government entity picking winners and losers, redistributing wealth, and inviting collusion between lawmakers and companies while spending taxpayer dollars on large private companies that could be spent helping all Michiganders.

House Bill 56025603, and 5604 aim to create the Strategic Outreach Attraction Reserve (SOAR) Fund for the Legislature to create incentives to attract large projects and prepare future job sites for development.

Once an agreement is reached, SOAR funding would be moved, via legislative transfer, to one of two other funds created by the plan. The Michigan Strategic Site Readiness Fund would provide grants, loans, and other economic assistance to aid in the creation of investment-ready sites. The Critical Industry Fund would offer deal-closing, gap financing, or other economic assistance to qualified businesses creating jobs or making capital investments.

Rep. Steve Johnson, R-Wayland, described the bill as “big business getting into bed with big government.”

He added: “We’re actually giving from the poor to the wealthy.”

Rep. John Cherry, D-Flint, supported the incentive package. He says the technological revolution demands higher investments to fight off job loss. For example, Flint has lost 80,000 auto jobs in the past four decades.

“Other states know that when there’s technological change and we have to totally rebuild our manufacturing base to reflect where we’re going technologically, they have an opportunity to grab that market,” Cherry said.

Rep. Ben Frederick, R-Owosso, said the bill ensures company accountability via performance-based clawback provisions for when companies fail to achieve promised results.

“Our state continues to offer a tremendous opportunity to job providers, and we are sending a message today,” Frederick said on the floor. “We aren’t giving an inch in the national landscape for the emerging technology, projects, and jobs we know belong in Michigan.”

Jimmy Greene, Association of Builders and Contractors of Greater Michigan Chapter president and CEO, applauded lawmakers for the package that might make Michigan a more attractive state for businesses.

“People don’t have an obligation to come here,” Greene said in a phone interview with The Center Square. “We haven’t demonstrated, quite frankly, that we’re a really great place to come and do business in. I think this is the time to … do some things differently and get out of our own way.”

Reported nondisclosure agreements also complicate the deal. The Detroit New reported several lawmakers signed nondisclosure agreements barring them from discussing project details.

Economists were skeptical.

Nathan M. Jensen, a University of Texas economist and co-author of Incentives to Pander: How Politicians Use Corporate Welfare for Political Gain, tweeted about the deal: “Politicians won’t say if they signed non-disclosure agreements with companies that would benefit? Not disclosing non-disclosures. Sure. Why not.”

John Mozena, president of the Center for Economic Accountability, a nonprofit organization for transparent economic development policy, has previously told The Center Square that subsidies don’t change business decisions most of the time.

An Upjohn Institute for Employment Research study concluded between 75% and 98% of all subsidized investments would have happened without the subsidy.

A Mackinac Center for Public Policy report analyzing more than 7,300 incentive deals in Michigan concluded that business incentive programs increase a company’s employment and sales, but come at an average taxpayer cost of $593,913 per job created per year.

Large developments like these cost taxpayers. For example, Tennessee lawmakers are forcing taxpayers to foot nearly $900 million for Ford’s new factory, the AP reported.

The package moves to the Senate.

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Scott McClallen is a staff writer covering Michigan and Minnesota for The Center Square. A graduate of Hillsdale College, his work has appeared on Forbes.com and FEE.org. Previously, he worked as a financial analyst at Pepsi.
Photo “Michigan State Capitol” by Brian Charles Watson CC 3.0.




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