Will Republicans Backtrack on Corporate Welfare Cuts?

Many economic development programs receive bipartisan support

Monday morning, reporters Zoe Clark and Rick Pluta published a radio story and article about how Lansing Republicans “had adopted the tax break religion” on targeted tax breaks. As evidence, there is apparently a deal in the works that would provide taxpayer funds of some sort to a particular business in exchange for a promise to locate or expand in West Michigan.

The article tries to make the case that Republicans have been opposed to tax credits. But this is hardly the case, whether in the early to mid-2000s or even more recently.

Consider the evidence presented by the authors. Under the heading “GOP Economic Theory” they say this:

In the early to mid-2000s, Republicans mocked former Democratic Governor Jennifer Granholm over her backing of tax credits that benefited particular industries (think movie tax credits, alternative energy or next-generation batteries) and the idea of the government picking economic winners and losers. [Emphasis added]

Governor Rick Snyder reiterated that, under his watch, Michigan is getting out of the business of industry-targeted tax breaks.

“We are focused on creating the best environment and climate for success, and letting free enterprise work.”

Consider for a moment these claims.

  • Only one Republican in the entire Legislature — Nancy Cassis — opposed the creation of a movie production tax credit, casting a “no” vote.
  • In 2008, House Bill 6611 — a bill to give $100 million in tax credits for makers of battery packs — passed unanimously in the House. That is, no Republicans voted against it. The bill was passed 33-3 in the Senate, with only 3 Republicans voting against it.
  • A different battery tax credit bill — Senate Bill 855 — passed the Senate in 2011 with 21 Republicans voting “yes” to establish up to $50 million in credits. Only five Republicans voted “no.” On the House side, 38 Republicans voted in favor of the bill while 23 opposed it.
  • In 2005, Senate Bill 583 assured that targeted tax breaks were available to companies involved in alternative energy research and manufacturing. The Senate and House versions of the bill were both passed. Unanimously: Not a single Republican voted against the legislation.

Republicans, then, have not mocked targeted business favors so much as cheered them on.

In 2003, Republicans in both chambers announced their new jobs initiative. Their press announcement read: “Republicans Vow: ‘We Will Fight for Every Michigan Job,’” and “Legislative Leaders Announce Jobs and Economic Stimulus Plan: Creating Manufacturing Jobs, Spurring Business Investment top GOP Proposal.” Their nine-point plan featured prominently the renewal of the Michigan Economic Growth Authority tax credit program, the highest-profile and most expensive (and now defunct) of all the state’s incentive programs.

These are just a few examples that refute the claim that Republicans in the Legislature have a history of strongly opposing targeted incentives. The list of past tax credit and incentive programs and legislation supported by state Republicans is long. But the results have not necessarily been distinguished by success in creating jobs.

Gov. Snyder phased out the failed MEGA program — to his credit — but he simply replaced it with a smaller subsidy program. He also approved a $4 million increase in the state industrial subsidy for tourism advertising, a program that the Mackinac Center has demonstrated is ineffective. (See the analysis here.)

The evidence very clearly shows that Lansing Republicans have long had a fetish for targeted tax credits, subsidies and the central planning of our economic lives. They should not have in the past and they should not in the future. Research shows that such programs are ineffective at creating jobs and wealth and are unfair to those who are forced to foot 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.