News Story

Bill Grants Big Businesses Power to Raise Taxes in 'Business Improvement Zones'

State Rep: 'Corporate welfare is a bipartisan issue'

The Michigan Legislature passed a bill that would expand "business improvement zones" and allow larger businesses to potentially force smaller companies into paying higher taxes.

Senate Bill 257 is sponsored by Sen. Mike Kowall, R-White Lake. It passed the House 77-31 and the Senate 31-4. describes the law as "increase[ing] from seven years to 10 years the time one of these zones can operate without reauthorization, revise voting rules in a way that (potentially) reduces the proportion of property owners in the district needed to impose a zone's tax-and-spending powers, increase the proportion of owners needed to dissolve one, reduce notice and public meeting requirements required to establish a zone, allow the 'zone' to sell services to particular property owners, increase penalties for not paying the ‘special assessment’ property taxes these entities impose, and make other changes."

Business improvement zones have been around since the early 1960s. But the new bill would tweak the law to give larger businesses with more capital more ability to control the process.

"The key reason I voted 'no' on it was that it just added another layer of unaccountable government bureaucracy to the idea of developing new businesses," said Sen. Patrick Colbeck, R-Canton. "I wanted to make sure they're accountable, and I'm not a big fan of having a whole bunch of separate enterprise zones. If they are so good then we should make them applicable to the whole state."

Sen. Bruce Caswell, R-Hillsdale, had similar reservations.

"It was my understanding that basically the bill was changing the process by which these zones were established," Sen. Caswell said. "Larger businesses would get more influence in the process than smaller businesses. That's why I voted against it. This changes the rules by how these things are approved, extended and so on."

Rep. Jeff Irwin, D-Ann Arbor, voted against the bill in the House and agreed with the criticisms.

"The way that they organized the voting on these special assessments was problematic for me," Rep. Irwin said. "Democracy is not like a shareholders meeting where citizens have their political power apportioned according to their economic power. That's a problem for me. And that's the way this bill works. Basically it stipulates that in these business improvement zones, your voting power is based upon your value. And I think that's a problem for smaller, less resourced businesses or property owners that deserve a voice in their taxation."

Rep. Irwin said he thinks this bill tilts the playing field too far.

"Maybe you have someone who wants to assemble all the properties on the block or you have a hold-out, maybe a longtime mom-and-pop business that's been there and doesn't want to sell. This bill would allow that larger property owner to slap a massive assessment on the back of their smaller competitors who they want to push out," Rep. Irwin said. "The big heavy hitters in the neighborhoods could squeeze out the little folks. I just think that's wrong."

The bill passed with bipartisan majorities, which didn't surprise Rep. Irwin.

"Corporate welfare is a bipartisan issue," he said.

Senate Bill 257 passed Sept. 18 and is headed to the governor's office. It is unclear as to whether he will sign or veto the bill.

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.