Posted on 10/28/2014 12:20:25 PM PDT by MichCapCon
Michigan Capitol Confidential has been reviewing how the state's economy performed during the previous decade, in answer to a question raised by a politician’s recent assertion that “those years weren’t as bad as we think.” Separate articles looked at changes in Michigan’s employment, personal income and loss of people to other states. The data shows the period was quite bad, although causes and culprits will be debated.
But one sector does appear to have experienced significant growth during the 2000s: corporate welfare, euphemistically called “economic development programs” by politicians.
Measuring its growth is challenging because of frequent changes in programs and goals, a lack of transparency, and an abundance of spin and puffery in the information that is released. Moreover, the state has a poor record of actually confirming that subsidy recipients kept their “jobs” and “investments” promises.
Nevertheless, figures do exist illustrating the overall trajectory.
The Michigan Economic Growth Authority was considered the state’s flagship economic development program in the 2000s. Launched by Gov. John Engler in 1995. It granted “refundable” tax credits to particular firms selected by political appointees on the entity’s board. (MEGA was replaced in 2011 by a direct subsidy program, with amounts appropriated annually by the Legislature.)
Companies had to make investments and employ specified numbers of people before they could collect the credits, which were delivered in the form of business tax reductions and flat-out subsidy checks. How much of each has not been revealed to the public, reportedly due to Treasury Department rules.
As the charts below show, the volume of MEGA activity rose sharply under Gov. Granholm, both in the quantity of deals and their size:
Value of Credits The number of jobs promised by these deals rose apace:
Direct Jobs
Most of the jobs never happened though. A 2009 Mackinac Center study found that from the program’s 1995 inception through 2004, only 29 percent of the jobs initially promised came to pass. And even when these companies added jobs, considering the costs of these incentives, it’s questionable whether their net economic effects are positive. Moreover, it is impossible to know how many of those jobs would have happened even without the special treatment.
In addition to expanding MEGA, Gov. Granholm also launched her own selective subsidy and tax break programs. One of these was called the 21st Century Jobs Program, an economic central planners’ smorgasbord ranging from business loan guarantees to panels of “experts” allocating state research subsidies to the state actually owning a share of particular businesses. This was approved by the Legislature in 2005 and financed by $400 million in new government debt, with a commitment to spend an additional $75 million annually for another eight years (spending that continues today.)
Like MEGA, the results were not what was promised: A 2013 Auditor General report found that just 19 percent of the original jobs projected came to pass.
A number of other corporate and subsidy programs were launched or expanded by Gov. Granholm. One paid up to 42 percent of the expenses incurred in Michigan by film producers. In 2011 the open-ended nature of these film subsidies was ended, replaced with fixed-sum grants ($25 million worth in the 2011-2012 fiscal year, and $50 million annually in subsequent years.) As of last spring, nearly $450 million has been spent on these subsidies, with little to show for this massive redistribution of Michigan taxpayer dollars (see chart).
Film Jobs
There is no systematic evidence that the corporate welfare expansion did anything to relieve the dismal economic conditions that prevailed during Michigan’s “lost decade.” Indeed, the evidence from many studies shows that these government attempts to pick winners and losers were actually harmful.
Sorry, but tax breaks and credits are not welfare. Letting someon keep their own money is never welfare.
I oppose all of these kinds of programs. I even oppose it being done by Republicans in my state.
When you are taxing the bejeevus out of other people and letting a few go without paying taxes, that is indeed a form a welfare.
Entitlement army to provide the votes.
Crony capitalists to provide the dough.
Look at the list of major US corporations supporting Posesta’s Center for American Progress.
No it's not. It's overtaxation of the others. But letting anyone keep their own money can never be welfare.
“Sorry, but tax breaks and credits are not welfare. Letting someone keep their own money is never welfare.”
Exactly, the left plays this spurious card every time someone or some entity gets to keep more of the income they generate. Welfare, by definition, is money delivered to the parasites that don’t work, don’t contribute, and don’t pay taxes—this is welfare.
But what it is is the government using the tax code to pick the winners and losers in the marketplace.
And that's something every government in the history of mankind has done.
It may not be welfare but it is definitely government intrusion into private industry. What do these tax breaks do to the competition that does not get them? Crony capitalism isn’t as devestating as socialism but it certainly does not promote a free market.
My question on targeted tax breaks is if you know tax breaks are a good way to stimulate the economy, why not cut everyone’s taxes. The answer is usualy “everyone” doesn’t lobby legislatures.
As are all taxes.
Still doesn’t make it right.
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