Michigan Paying $860 Million In Select Tax Incentives, Subsidies

Favored businesses get preferences

By Tom Gantert | March 26, 2014

The state of Michigan is expected to pay $860 million for economic development credits and programs in fiscal year 2014 and most of that money is slated for politically favored business such as Hollywood's movie industry, according to the Michigan Department of Treasury.

"The spending we are doing on economic development is large," said James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy. "And the majority of these expenses are for decisions made years ago. The state shouldn't be in the business of awarding tax money to favored industries."

Michigan could certainly use that money. Gov. Rick Snyder has requested $1.2 billion in road funding and drivers across the state are dodging potholes on well-worn roads.

Michigan has set aside the $860 million to pay subsidies the state agreed to mostly when former Gov. Jennifer Granholm was in office. In fact, $638 million of the total $860 million are from Granholm-era deals, largely in the form of select tax incentives.

The subsidies and grants also come from state programs such as the Michigan film incentive program, which reimburses movie producers for expenses while filming in Michigan. According to the state treasury, Michigan has devoted nearly $450 million in those incentives through 2014.

While movie incentives are usually over within a year after the film is released, some other deals end up costing taxpayers and the state for years.

For example, the state agreed to give Picometrix Inc. a tax credit worth an estimated $6.8 million in 2001 to expand its operations in Ann Arbor, according to a press release. State taxpayers were still paying off Picometrix tax credits in 2013. Picometrix makes high-speed optical sensing devices.

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Right-to-Work States See Larger Gains

Personal income and population growth numbers released

By James M. Hohman | March 25, 2014

The 2013 state personal income data was released recently and it has some good news for Michigan.

The state had the 9th best performance among the states from 2012 to 2013. While it's unclear how much of a role the passage of the right-to-work law had in the performance, it is worth a look at the trends between states with a right-to-work law and those without one.

In both personal income and in population growth, right-to-work states clearly have an advantage. From 2012 to 2013, right-to-work states grew their personal incomes by 2.8 percent and their populations by 0.9 percent. Non-right-to-work states grew their personal incomes by 2.4 percent and their populations by 0.4 percent.

When combined, per capita personal income between the two groups of states increased at roughly the same amounts. Michigan's above average per capita personal income growth can be attributed to average personal income growth and below average population growth.

Over the long term, right-to-work laws have been associated with inflation adjusted personal income growth, population increases and job growth.

Right-to-work may or may not be an influence, but Michigan's recent performance has shown improvements in all three measures.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.

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