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

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Michigan Gives Unfair Tax Handouts To Try and Counter 'Right to Work' States

Democratic Rep. ignores millions in special deals for company picking Michigan over Tennessee

Rep. Stanley, D-Flint

Michigan State Rep. Woodrow Stanley says right-to-work states aren’t as attractive as Michigan to companies considering a move, but the Flint Democrat ignores the millions of dollars the state hands out to try and be competitive.

In fact, the chief executive office of one of the companies Rep. Stanley says chose Michigan over a right-to-work state said in a video on the Michigan Economic Development Corp. website that he wouldn't have chosen Michigan without the MEDC tax handouts. That video is now listed as “private” on a MEDC website.

In a column he wrote for The Detroit News, Rep. Stanley said: “According to the Michigan Economic Development Corp., Ralco Industries invested $6.4 million in Pontiac, preferring Michigan to a competing site in the right-to-work state of Tennessee. Likewise, Clyde Union Pumps invested $17.1 million to expand in Battle Creek instead of choosing the competing right-to-work states of Texas and Louisiana."

But Tom Gitter, the CEO of Ralco Industries Inc., said in a video that a big part of coming to Michigan was the "willingness" of the state and local government to "equate the economics of the deal."

"Without the MEDC, this facility wouldn't have been built in Michigan," Gitter said.

An MEDC memo said Ralco Industries would pay lower taxes and wages had it picked Tennessee.

To build in Michigan, Ralco Industries received tax incentives estimated at $2.6 million.

And Clyde Union Pumps, another business cited by Rep. Stanley, had lower costs in building and personal resources in right-to-work states Texas and Louisiana, according to a July 20, 2010 memo. The tax credit, the MEDC said, would offset those disadvantages. State officials from Texas and Louisiana said they offered no tax incentives to Clyde Union Pumps.

The Bureau of Labor Statistics shows that from 2000-2010, employment in right-to-work states increased 3 percent while falling 3 percent in non right-to-work states. Michigan employment decreased by 14 percent over the same period. 

Rep. Stanley didn't respond to a request for comment.

"Michigan's had to offer special deals to lure companies and industries," said James Hohman, a fiscal policy analyst at the Mackinac Center for Public Policy. "This has been a magnet for crony capitalism. It's also been a bad deal for the economy because these special incentives do not give the state a sustainable advantage."

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See also:

Michigan Capitol Confidential Coverage of the MEDC

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