A news service for the people of Michigan from the Mackinac Center for Public Policy

How much background research does Michigan's corporate welfare bureaucracy actually perform on the potential recipients of its selective tax breaks and subsidies? Due to recent embarrassments the amount may be increasing, but until now the answer appears to be, "Not much at all."

The latest embarrassment is a fraud charge brought by the state Attorney General against a man involved in an "assignable" (saleable) business tax credit deal for the Hangar 42 film studio scheme in Grand Rapids. This subsidy was trumpeted by Gov. Jennifer Granholm and others as a victory for the state's film incentive program until the Mackinac Center broke the story by raising questions about some of the specifics.

But this wasn't the MEDC's first major gaff this year. That belonged to the Michigan Economic Growth Authority program's approval of a $9.1 million tax credit/subsidy to convicted embezzler Richard A. Short, a felon on parole who was not even allowed to possess a credit card at the time. Short sought MEGA favors for what appears to have been a shell company he called "Renewable and Sustainable Companies, Inc," or RASCO.

The "Briefing Memo" on RASCO prepared by MEDC staffers shows just how little due diligence actually goes into the picking of these winners and losers. The board itself mostly just rubber-stamps the deal presented to them, with very few generating any substantive discussion, much less denials.

A comparison of the MEGA application submitted by Richard Short with the "History of Company" section of the official state "Briefing Memo" prepared by MEDC bureaucrats suggests that the latter just did a copy-and-paste of the PR puffery of the former, with virtually no checking, critical analysis, or even critical thinking:

RASCO Application: "RASCO has developed a unique and powerful solution called IDUN (Integrated Distributive Utilities Network). IDUN integrates the essential utilities of electricity, water, and sanitation with information and communication technologies (ICT) under a single network."

MEDC Briefing Memo: "RASCO has developed a unique and powerful solution, the Integrated Distributive Solutions Network (IDUN), which integrates the essential utilities of electricity and water with information and communication technologies under a single network."

This example involves just one of hundreds of firms that have been granted MEGA deals. How many other dubious deals have skated through the process with a similar lack of background checking? Without much greater transparency from the increasingly secretive MEDC, it is impossible to know, but with tens of millions of dollars worth of lucrative tax breaks and outright cash subsidies at stake, one would be foolish to conclude that there are none at all.

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See also: 

Thirty-One MEDC Salaries Top $100K

Lawmaker Says Special Tax Favors Are 'Cronyism' 

Lawmaker Says 'Willful Neglect' Is the Rule at Embattled State Agency

Analysis: Michigan Taxpayers to Write $100 Million Check to Korean Battery Maker

Critics Shoot at Special Tax Deal for Super Speedway

Analysis: MEDC Letter an Admission of Failure

Embattled Agency in Charge of Special Tax Favors Snaps at Critics

State Taxpayers Eat $350K Loan for East Lansing Property Purchase

Google Jobs Lacking, Yet Some Locals Still Consider It a 'Badge of Honor' for Ann Arbor

No Audits for Ten Years on Companies Getting Special Tax Breaks from State

Lawmaker Says $150 Million in Unearned Tax Credits Given Out by State

State Websites Give History a Rewrite

The Most Dangerous Voice in the House

Small Businesses Vote Down "Give Away" Programs

Michigan #1 for Economic Development?

 

 

In this premiere episode of EconPop, Andrew discusses the economics of Academy Award winner Dallas Buyers Club. Subjects include public health and safety regulations, crony capitalism and the role of regulatory capture, the emergence of black and grey markets, and commercial exchange as a means for increased social tolerance.

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