News Story

Borders: A ‘MEGA’ Bankruptcy for Michigan

One of the first beneficiaries of the Michigan Economic Growth Authority tax credit program was Waldenbooks, a subsidiary of Borders Group.

The MEGA program, created in 1995, offers tax breaks to companies that invest or locate in Michigan. Waldenbooks chose Michigan over Tennessee and received a reported $7.7 million tax credit.

But Michael LaFaive, director of the Mackinac Center's Morey Fiscal Policy Initiative, pointed out that before the MEGA credit was even approved, the Ann Arbor News reported that the company’s president was buying a home in Michigan. LaFaive’s question: Was it really necessary to hand over the $7.7 million special credit if the company was already showing such strong signs of coming to Michigan anyway?

Now, more than a decade later, news that Borders is considering bankruptcy bolsters LaFaive’s belief that market forces will win out over government’s targeting of favored businesses for tax relief.

ABC News reported the following:  “Borders has cut jobs, shuttered stores, downsized its smaller Waldenbooks chain and made other moves to try to improve net income, but it still faces losses.”  

ABC also reports that Borders has received a delisting warning from the New York Stock Exchange because its shares were trading for under $1.

“It just reminds us that the MEGA Authority is not clairvoyant when it comes to picking winners and losers, be it in the short run or long run,” LaFaive said.

LaFaive said he considered it “ironic” that the reports of a possible Borders bankruptcy came in the same month as Gov. Rick Snyder’s announcement that he hopes to eliminate the MEGA program.


See also:

Gov. Snyder to Break Michigan's MEGA Habit

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.