Michigan House, Senate land 'big fish' business tax incentives

At the Capitol: Business tax credits

LANSING, MICH. - A package of tax incentive bills for businesses that create jobs in Michigan received wide, bi-partisan support in the House of Representatives Wednesday and are on their way to Gov. Rick Snyder for his signature.

The 71-35 votes on the three bills came despite Republican leadership in the House delaying a vote on the bills for nearly a month and ultimately opposing the legislation. 

“I have experience negotiating with firms looking to come to Michigan, I’ve seen the handcuffs that have been put on the state,” said Rep. Jason Sheppard, R-Temperance, one of 40 Republicans to back the bills. “We’re essentially in an arms race, not only with bordering states, but with the whole nation. If we do not equip our state with meaningful tools, we’ll always be at a disadvantage.”

State Rep. Leslie Love, of Detroit, one of 31 Democrats to back the bills, said the legislation will help get Michigan working again, and is especially needed in areas with high unemployment, such as Detroit.

“This is an opportunity to attract emerging industries and create new jobs,” she said. “We must grow our economy in Michigan, we must be competitive.”

During debate on the bills in the House, no one mentioned the big fish the state is hoping to land — Taiwanese technology giant Foxconn, which makes screens for televisions and cell phones. The company has said it wants to invest $7 billion in the U.S.  and Michigan is one of several states that is under consideration for the plants Foxconn plans for the U.S.

But there were both Republicans and Democrats who were opposed to the bills, calling them everything from crony capitalism to corporate welfare.

Speaker of the House Tom Leonard, R-DeWitt, who abruptly shelved the bills last month after learning that Gov. Rick Snyder was reportedly trying to cut a deal with the Democrats that was at odds with the GOP leadership to get the votes needed to pass the bills, remained opposed to the legislation.

"Senate Bills 242-244 allow the government to pick economic winners and losers, and that is simply bad tax policy," he said in a statement.

And Rep. Martin Howrylak, R-Troy, said, “The choice on these bills is very clear. The choice is for or against the taxpayer. We’re taking from the poor and middle-income citizens and giving that to a select corporate class.”

There also was a split in support among traditionally Republican groups. The Business Leaders of Michigan and many business groups around the state supported the legislation and applauded the passage. They were joined by Snyder, who said the approval will help bolster Michigan's economic comeback.

"We are now enacting forward-thinking policies that make us more competitive for new jobs and industries in a fiscally responsible fashion," he said in a statement.

But Americans for Prosperity, the Mackinac Center and the Michigan Freedom Fund, decried the legislation as another example of tax giveaways.

"It's like the legislature just got in a time machine and took Michigan back to the Granholm era," said Americans for Prosperity Michigan director Pete Lund, referring to former Gov. Jennifer Granholm. "Just months after voting down a personal income-tax cut for Michigan workers, House lawmakers have taken a dangerous trip back to sweetheart tax deals for a handful of the politically well-connected."

Tax incentives over the past two decades put Michigan in a $9.3 billion hole, leading the state to sharply curtail the tax credits and favor lowering the business tax rate for all businesses. The incentives passed Wednesday require eligible companies to prove that jobs are actually created in Michigan  and maintained before getting the incentives.

The logjam on the bills was broken last month when several amendments offered by Democrats were approved, including ending the program in 2019, lowering the value of the outstanding projects in the program from $250 million to $200 million and requiring eligible companies to make a good-faith effort to hire Michiganders for the jobs coming into the state.

"We are the ones who stepped into a leadership void and crafted amendments to make sure we got enough votes on both sides of the aisle," said Rep. Brian Elder, D-Bay City. We were ready to pass this a month ago."

Despite opposing the package, Leonard agreed to put the bills up for a vote after meeting with Snyder.

The Senate, which originally passed the bills in March, quickly concurred Wednesday afternoon in the changes made in the House and sent the bills to Snyder.

The legislation would:

  • Allow businesses that expand or relocate to Michigan to receive up to a 10-year, 100% abatement on the personal income tax withholdings of new employees if at least 250 new jobs are brought to the state, at wage rates that are at least 125% above the average for the region. 

  • Make the incentive  a five-year, 50% abatement on those withholdings for companies that bring in at least 500 jobs that pay the average wage for the region.

  • Companies that bring up to 3,000 jobs to the state at  average wages in the region also would qualify for the 100% incentive for up to 10 years.

  • Require that eligible companies make a good-faith effort to hire Michiganders for the new jobs in the state.

  • Prohibit  eligible companies from using jobs obtained through a merger or acquisition of another company as a qualifier for the incentive.

  • End incentives in 2019 and lower the maximum amount of tax incentives at any one time to $200 million

The businesses would be audited by an independent third party to ensure those jobs are maintained.

The incentive program would be limited to 15 new projects per year.

One of the reasons for the big push on the legislation was the state's efforts to lure companies such as Foxconn, which also is looking at Wisconsin, Ohio and Texas. Company leaders have said they would need tax incentives in order to invest in the states.

Snyder traveled to Japan last month in the hunt for foreign investments in the state, and Foxconn officials have visited sites in Michigan three times in the past month.

What is Foxconn?

The Taiwan-based maker of screens for televisions and cell phones has visited Michigan several times in the past month as it seeks to decide where to invest. A brief look at the company, also  known as Hon Hai Precision Industry Co.:

  • Headquarters: New Taipei, Taiwan

  • Profit in 2016: $148.7 billion

  • Number of employees: 1.3 million

  • Founded in 1974 by Terry Gou, who is chairman of the company

  • Foxconn locations: headquarters in Taiwan; electronics research and development in Brea, Calif.; electronic parts supplier in Harrisburg, PA; manufacturing factories in China, Brazil, Mexico, Japan and Europe.

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© 2017 Detriot Free Press


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