The Lowdown

SMALL BUSINESSES VOTE DOWN "GIVE AWAY" PROGRAMS

Small business owners have had it with state-sponsored "give away" programs targeted to pet industries or businesses, according to an April 9 press release from the Michigan chapter of the National Federation of Independent Business. (See related cover story, Politically Correct Capitalism.)

In a recent survey returned by more than 600 of its members a single question was asked:

"Do you support tax credits and economic incentives targeted to a specific company or industry? In recent years, state government has attempted to attract specific companies and certain industries to Michigan by offering generous tax credits and other incentives. Similar incentives have been offered to companies already in the state that promise to expand and create new jobs. Recent examples include incentives for the movie industry, alternative energy, life sciences and high technology companies."

Sixty-seven percent of the respondents answered in opposition; just 21 percent were in favor of the special tax credit policy and 12 percent were undecided.

"Many small businesses believe that the tax hikes they have seen from the Michigan Business Tax (MBT) are directly taking money out of their pocket to fund these other businesses and they don't like it," observed Charlie Owens, NFIB's state director. "They see clearly that as more tax dollars are lavished on whatever 'pet' industry is popular at the moment, there is less money available to improve the overall state business economy and tax climate so that all businesses have an even playing field to compete and create jobs."

Owens states that NFIB-Michigan has a membership of about 10,000 who represent "a cross section" of the state's small business community, from manufacturing and construction to retail, finance, real estate, farming and more. The average member has five employees and annual sales of $500,000.

Michael LaFaive, director of the Mackinac Center's Morey Fiscal Policy Initiative, has profiled two instances where state government has used these special favors to lure out-of-state rivals to come into Michigan and compete with long-established Michigan job providers.

During December of 1999, Boar's Head Provisions, a New York-based meat products company, opened a facility near Holland, Mich., after receiving a $5.1 million "economic development package" from the Michigan Economic Development Corp. The MEDC is the state's main facilitator of the special incentives that were the subject of the NFIB poll. The agency crowed in a press release that its work would help Boar's Head add "new jobs" to the Michigan economy.

Writing in 2000, LaFaive noted that the MEDC's media release displayed indifference regarding the impact of their efforts on the 110 jobs then being provided by Koegel Meats Inc., of Flint, Mich. (www.mackinac.org/2729.) Like Boar's Head, Koegel is in the meat products business, making among other things the "Vienna Frankfurters" that have been a mainstay of summer grilling in Michigan for generations. But unlike the new competition being lured in from New York by state government, LaFaive noted that Koegel had been a Michigan business since 1916 and had "always paid its taxes and never took a dime of taxpayer money: no abatements, no subsidies." LaFaive asserted that all Michigan taxpayers, including the Koegel family, were "being forced to help subsidize a New York firm that will compete directly with Koegel Meats."

Similarly, in 2002, LaFaive profiled Jay's Sporting Goods, another well-known and established Michigan job provider that one day discovered that the MEDC was going to give special favors to an out-of-state business rival (www.mackinac.org/4475.) In this case Cabela's — a "mammoth" outdoor goods catalog retailer — received $27.8 million worth of special incentives in exchange for putting up a 200,000 square-foot outlet store in Dundee, Mich.

As with Koegel, LaFaive noted that Jay's had been operating as a family business in Michigan for decades and had grown to two 100,000 square-foot stores for outdoor enthusiasts without ever "taking a dime of taxpayer money."

"When I first learned that our competition would get state assistance, I was flabbergasted," one member of the family that owns Jay's told LaFaive. "It sometimes makes you wonder who you are working for."

COPS, CARS, BOATS AND BANKRUPTCY

The May 14 edition of the MIRS Capitol Capsule newsletter carried a pair of stories about two annual summer events in Michigan and how they relate to the state's deteriorating economic climate (www.mirsnews.com — subscription required.)

One story highlighted the changed atmosphere expected at the Detroit Regional Chamber of Commerce's annual policy conference held in late May on Mackinac Island. Unlike previous years, financially embattled domestic automakers such as General Motors and Chrysler were not expected to be "sponsoring any parties" or "handing out bags or backpacks stitched with their logo." Additionally, attendance by state lawmakers was expected to decline because of reduced sponsorships from many companies — such as automakers — who had previously been underwriting the cost of the trip for some legislators.

"The companies that took TARP [Troubled Asset Relief Program] and the auto-related companies aren't sponsoring anything right now," Sarah Hubbard, DRCC vice president of government affairs, told MIRS.

Also that day, MIRS carried a story that Travel Michigan, a branch of the Michigan Economic Development Corp., had announced that for the first time ever it was going to become the "title sponsor" of the annual Port Huron to Mackinac Island sailboat race. The newsletter says that the state agency will be paying $100,000 for the sponsorship.

Responding to criticism that the expenditure was ill-timed in relation to the state economy, projected state budget overspending of up to $2 billion and the recently announced layoff of 100 state police troopers, the president of Travel Michigan noted that the sponsorship was a comparatively trivial portion of the state budget and that it "introduces Michigan to the country as a destination" because the agency plans to integrate it into a national expansion of its "Pure Michigan" marketing campaign.

The race has apparently already been bringing attention to Michigan without the MEDC assistance. MIRS notes that 2009 will be the event's 85th year of operation and that it is expected to draw 250 boats and 2,500 sailors. The Travel Michigan president is quoted as saying that the race already has an international reputation.

The Travel Michigan president also told the newsletter that his budget had been increased from $6 million in 2005 to $30 million this year.

RENDER UNTO CAESAR?

On May 20, 2009, the Michigan Senate approved Senate Bill 128, a proposal that would order the Michigan Secretary of State to develop a "fundraising" specialty license plate with the words "In God We Trust" inscribed on it. Sponsored by State Sen. Cameron Brown, R-Fawn River, the bill would also require that all money raised by purchases of these plates be turned over to state government's general fund, where it can be spent on whatever state program lawmakers and the governor decide to use it for. According to a Senate Fiscal Agency memo, motorists choosing to purchase the special plate would each pay an additional $15. Brown, who is term-limited, is planning to run for Secretary of State in 2010. 

Six other bills — authorizing many other specialty plates — were also approved on this day for tags identifying Habitat for Humanity, the Boy Scouts and more. A handful of lawmakers voted against each of these bills. The reason for the opposition, according to statements made by some lawmakers in the Senate Journal, was because of a desire to respect the Michigan Department of State Police's concerns that the proliferation of different plates will impede troopers' ability to identify vehicles on the roadway.

Twenty-eight senators, including the entire Republican caucus and eight Democrats, voted in favor of Senate Bill 128. Eight lawmakers were opposed.

Unlike Senate Bill 128, the revenue generated from some of the other specialty plates would be turned over to specific charitable causes designated by the organizations indicated on the plates. For example, a "Ducks Unlimited" plate would give the additional revenue to the Michigan chapter of Ducks Unlimited so that this group can "protect, enhance, restore, manage and acquire" wetlands.

The specialty license plate bills approved on May 20 in the Senate are now under consideration in the House of Representatives.

For additional information and an opportunity to comment on these issues, please see www.mackinac.org/10529.