Predicting how many jobs the government will get for the $383 million in subsidies it plans to pour into the Livonia battery facility isn't always an exact science. Even Michigan Governor Jennifer Granholm didn't cite what her own economic experts say when it came to the jobs numbers game.

This week, Granholm wrote the following in a blog post on the Huffington Post: "Best of all, the new facility has already created over 300 new Michigan jobs, and A123 Systems' production plans project another 3,000 clean technology jobs to follow."

Liz Boyd, Granholm's spokeswoman, stated in an e-mail the 3,000 jobs figure was based "conservatively on what company officials have said in the past."

But that 3,300 jobs figure far exceeds what the Michigan Economic Development Corporation is projecting for the A123 Systems plant. The state is paying $133.9 million and the federal government is giving $249 million.

According to a legislative briefing memo from April of 2009, A123 Systems plans to create 844 jobs over the next five years. Those jobs would pay about $29,000 a year. The memo states the facility will create a total of 2,217 jobs in the state by 2024.

But those additional 1,373 jobs are "indirect" jobs. That means they aren't jobs created by the A123 Systems plant, but jobs that will be created in the local economy due to the capital investment, operating expenses and payroll of the operation, according to Mike Shore, spokesman for the MEDC.

In other words, it's the extra waiters, shoe salesmen and convenience store clerks hired by other companies due to the plant locating in Livonia. Those jobs are usually spit out by an economic model and there is no follow-up to see if they were ever created.

"These are nothing but funny numbers they pull out of their back side," said Charlie Owens, director of the Michigan chapter of the National Federation of Independent Businesses. "Nobody keeps track. So it looks good."

But State Representative Tom McMillin, R-Rochester Hills, says what bothers him is how few jobs A123 Systems is required to create to get the $383 million in state and federal subsidies.

McMillin poured through the legal documents on the deal and said that the company only needs to create 300 jobs by Dec. 31, 2016 to get most of the state money and doesn't need to create a single job to get the $249 million in federal aid. A123 Systems would have to create 350 fulltime jobs by August 2012 to have a $4 million loan forgiven.

"We keep hearing all these grandiose plans and claims of thousands of jobs, yet whenever I've tried to put those inflated numbers as requirements for getting our millions of taxpayer dollars, they always say, 'No,' " McMillin wrote in an e-mail.

"The fact is, A123 only has to have 300 new jobs to get over $100 million in checks (subsidies) from Michigan taxpayers. That's over $300,000 per job of our money and over $700,000 per job of federal money (which is debt laid on our kids).  Real, independent studies show that these schemes, while getting some headlines, actually cost Michigan jobs, because existing businesses pay for those subsidies with higher taxes that would have gone to either preventing layoffs or hiring new employees."

The state's record of predicting job creations is questionable, according to the State Auditor general. The audit found that "direct job" projections in MEDC press releases occurred 28 percent of the time. That caused State Senator Nancy Cassis, R-Novi, to tell MEDC CEO Greg Main, "The press releases are an absolute disconnect with reality."

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See also:

No Audits for Ten Years on Companies Getting Special Tax Breaks from State

Experts Say State Battery Plant Subsidy Is a "Risky Venture"

Michigan Taxpayers Writing Check to Second Electric Car Battery Maker for $100 Million

Michigan Governor Touts Jobs Costing Taxpayers $113,000 Each

Cost to Revive Economy With Battery Plant Subsidies: $5 Trillion 

Lawmaker Says 'Willful Neglect' Is the Rule at Embattled State Agency

Lawmaker Says Special Tax Favors Are 'Cronyism' 

Small Businesses vs. Big Governments

SMALL BUSINESSES VOTE DOWN "GIVE AWAY" PROGRAMS

 

 

Editor's note: This article was previously published but is relevant to current events. The document at issue still exists and public officials still cite it as a source for acquiring additional state revenue.

"The $112 million in loopholes recommended for elimination by the Governor would go a long way towards balancing the budget without sacrificing critical services to the poorest of the poor. There are 170 tax expenditures in Michigan's tax code that cost taxpayers over $29 billion a year."

- Press release from Gov. Jennifer Granholm's office, June 9, 2005

The above statement cites one of the most malicious documents produced by state government: the Michigan Department of Treasury's annual "Executive Budget Appendix on Tax Credits, Deductions and Exemptions." Rather than a tally of taxpayer "costs," the document is in fact a listing of where residents are being spared major tax increases. Under truth-in-advertising guidelines, this report should be renamed the "Tax Hiker's Shopping Guide." An example of its damaging impact can be found on page 49 of the 2007 edition, which contains many of the items on the governor's recent proposal for an unprecedented $1.5 billion tax on services.

If state lawmakers and the governor consider Michiganians more than mere cash cows, they should stop reading the "Tax Hiker's Shopping Guide"...

The "Tax Hiker's Shopping Guide" talks about taxpayers keeping their own money as if it's an example of pork-barrel spending. A reader can quickly forget who earned the money in the first place when reading it:

"Tax expenditures can be defined broadly as the tax revenue foregone as a result of preferential provisions such as credits, deductions, exemptions, deferrals, exclusions or lower tax rates. These provisions are tax expenditures because, like appropriations, they allocate resources for specific public purposes, but do so through the tax system rather than the expenditure system. For economic purposes, it makes no difference whether a policy objective is pursued through direct spending or through the tax code."

In other words, the "economic purpose" of your money is to accomplish what state government wants to do. Whether this happens by way of you spending the money or the government doing it for you is a mere detail.

The document represents an audacious government wish list. While it included about $29 billion in potential tax hikes when the governor spoke of it in 2005, the 2007 version contains just over $31 billion - enough to more than double the annual amount of money taken from Michigan residents.

First created in 1979, the report states that getting politicians to consider tax hikes is its reason for existence: "It is designed to aid policymakers in evaluating the efficiency, effectiveness, and relative importance of each tax expenditure."

Mission accomplished: The governor seriously promoted - and the Legislature seriously considered - imposing a $1.5 billion service excise tax this year. Fortunately, Michigan taxpayers were far less enthusiastic about it and the service tax - which would have cost an estimated 19,000 jobs in its first 18 months of existence - appears to be tabled.

The rest of the avaricious list details a tax increase idea for nearly every economic transaction:

• The state constitution prohibits a sales tax on food and prescription drugs, yet the "Tax Hiker's Shopping Guide" still fantasizes about the $1.65 billion such a tax would generate.

• In one of its more macabre moments, the guide mentions an extra $50 million the state would gain if it went after orthopedic products such as artificial limbs and eyes!

• The governor excluded health care and social assistance from her 2 percent service tax proposal, but the guide notes that a full 6 percent levy on these activities would ding taxpayers an additional $5.2 billion.

• State coffers could swell by $1.8 billion if pension benefits, IRAs, worker's compensation, health insurance premiums, veteran's benefits and Social Security payments were taxed.

• The state could get another $69.5 million if it repealed the sales tax "loophole" on tap water purchases.

• While killing the homestead property tax exemption for homes and farms would fatten state coffers by $4 billion, just removing the partial income tax deduction for homestead property tax payments would net more than $860 million.

This is not an exhaustive list. Other examples of state coveting are detailed in plots to tax charities, education, the federal government and much more. The mere existence of such a report creates the clear impression that Michigan's political class views the private wealth of taxpayers as its personal piggy bank. If state lawmakers and the governor consider Michiganians more than mere cash cows, they should stop reading the "Tax Hiker's Shopping Guide" and get to work on abolishing it.