2017-07-13 / News

Michigan Looks at Options for Tax Incentive Program To Attract New Jobs

By Erich T. Doerr

The Michigan legislature is considering approving three Senate bills jointly known as the Good Jobs for Michigan Act that would create a tax incentive program desired to bring more new jobs to the state. The Act, currently Senate Bills 242 through 244, aims to make Michigan more competitive with other states in the Midwest and throughout the country that already use incentives to bring in new investments. A vote on the bills was planned for Wednesday, July 12.

The Good Jobs for Michigan Act is designed to offer companies an incentive equivalent to the amount of their employees’ state personal income taxes, in exchange for business expansions or the creation of new locations. The money going to the company would not affect workers’ personal tax returns. If the act is approved, a business that creates at least 500 new full-time jobs paying at least 100% of the average regional wage would be allowed to receive 50% of the amount of personal income tax withholdings of its new employees for up to five years. A business that creates at least 250 full-time jobs paying at least 125% of the regional average wage would be allowed 100% of the amount of personal income tax withholdings of the new employees for up to 10 years.

The incentives are performance based. Businesses would have to create the required jobs within five years to qualify for them. They would not start receiving them until job and wage targets are reached and then would have to be maintained and verified every year. If the company does not meet the requirements for a year, it would not receive its incentive. Before any expansion or new location plans receive incentive funding, they would require a third-party analysis to prove their net economic benefit for Michigan, a letter of support from a chief local government official at the planned location, and the fulfillment of a stipulation that the jobs would not be have been created here by without incentives.

Because the incentive would only be offered to jobs that would not have been created without it, the act would not represent a cut to state revenue. The state hopes to trade some short-term personal income tax revenue, which will accrue back to the state later on, anyway, in exchange for increased economic activity that would benefit the communities and schools with more property tax and sales tax revenue.

If approved, the state will only be able to offer the incentive to 15 projects a year with no more than $250 million in incentives being offered at any one time. All of the incentives will focus on large-scale projects with no preference given on the industry. Retail businesses, casinos, and sports stadiums are not eligible to receive them. Businesses that would receive funding and the amounts they are given would all be publicly disclosed.

The bill does not contain anything location specific, so there is nothing favoring any region or another. The act could benefit the Upper Peninsula even if no large investment here was spawned by the incentives. The addition of significantly more good paying jobs downstate would likely lead to increased tourism and property purchases in the U.P. It could also offer U.P. suppliers new clients interested in their services.

“It’s the rising-tide-lifts-allships mentality,” Upper Peninsula Economic Development Alliance (UPEDA) Chair Joel Schultz told The St. Ignace News, noting that while he favors a hands-off approach to business by the government, the UPEDA endorses the act. “I think this would be a good thing for our state, but that is just my opinion.”

There has been some criticism of the bill that it could be taking money from state coffers to offer as incentives to the wealthy, although the bill is written to avoid that issue, since funds can only go toward businesses resulting in a net gain of new jobs. Mr. Schultz noted some others have questioned the act on principle, as it results in government involvement with business, but this is a course of action other states are already taking, making it a reality of modern business. Companies often select the locations for their businesses today based on what the location is offering in exchange.

Incentives are already used by both left and right-leaning states across the country for job creation, including both Michigan’s Midwestern neighbors Indiana, Wisconsin, and Ohio, and more southern states like Georgia, South Carolina, Kentucky, Tennessee, and Texas. Michigan has already been offering some competitive cash incentives for small and medium-sized projects, as almost all other states also do, since January 2012. As it stands, Michigan is one of only two states that has a corporate income tax and no tax credits, the other being Alaska. Michigan has created more than 480,000 private sector jobs in the last five years,ß but still remains 300,000 jobs below its peak employment levels reached before the 2008 recession.

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