Michigan to Write $1 Billion in Secret Corporate Welfare Checks in 2016

The state of Michigan will write more than $1 billion in subsidy checks this year to favored businesses selected by politicians and government economic development officials. These are dollars paid by Michigan taxpayers, which the state then redistributes to corporate beneficiaries.

The subsidy checks are styled as "refundable tax credits," and a significant portion of them were approved during a subsidy binge in the last two years of former Gov. Jennifer Granholm's administration, in 2009 and 2010. Each company has its own agreement with the state, and many of the agreements call for tax breaks and cash payments for as long as 20 years.

Many of these credits were not designed to encourage companies to make new investments or hire more people. Instead, the deals were offered to companies (including the Big 3 automakers) in return for them simply “retaining” existing jobs and facilities.

Companies have some discretion over when to claim these credits, which means the Department of Treasury never knows for certain how large the bill will be in any year. According to the Senate Fiscal Agency, as of June, the state has already written checks to companies totaling $851.5 million. The state’s fiscal year ends Sept. 30.

The law that authorized the handouts originated in the administration of Republican Gov. John Engler. It created an entity called the Michigan Economic Growth Authority (MEGA) with the power to give subsidies. Republicans and Democrats alike later changed the law many times to expand and loosen the criteria for granting subsidies.

The state stopped awarding new MEGA credits in 2012. They were replaced by a smaller subsidy granting regime. Not counting the MEGA credits, these and some other subsidy programs will cost the state another $217 million this year.

The Michigan Economic Development Corporation oversees the state’s corporate welfare programs, including MEGA, and refuses to say which businesses get the payments or how much they are paid.

“The state is expected to give over $1 billion of other people’s money to companies it selected for favors. It’s bizarre that taxpayers are not allowed to be told which ones are collecting,” said James Hohman, the assistant director of fiscal policy for the Mackinac Center for Public Policy.

The MEDC didn’t respond to an email seeking comment.