Potential Corporate Welfare Binge Risks Second Michigan ‘Lost Decade’

Gov. Rick Snyder scaled back the giveaways in 2011

During Michigan’s economic “Lost Decade” of the 2000s, state government seemed to have just one response for crushing income and employment declines that cost some 800,000 residents their jobs between 2000 and 2010: more corporate welfare.

If there was any evidence this approach works to turn around an ailing economy — there is not — it still could not have overcome the massive drag imposed on the Michigan economy by business and income tax increases enacted in 2007, and smaller exactions like a 2004 property tax hike.

Starting in 2011 a new governor steered a different course. Gov. Rick Snyder scaled back the pace of corporate giveaways, eventually ended a disastrous $500 million film subsidy adventure and replaced a destructive gross-receipts-type business tax with a simpler and less onerous corporate income tax.

It appears to have helped as Michigan incomes and employment levels have grown much faster than the national average since the last recession.

But corporate welfare is always an attraction for politicians. Today, in the absence of any overarching growth agenda, lawmakers on both sides of the aisle are falling back into past bad habits. Indeed, the upcoming lame duck legislative session could see a corporate welfare blowout.

To protect his legacy of growth and reform, Gov. Snyder should be prepared to wield a sharp veto pen.

One bipartisan proposal could deliver potential taxpayer subsidies to Dan Gilbert of Quicken Loans and other downtown developers. Fiscal analysts can't yet estimate the costs. Snyder has raised some concerns but not taken a public position on the idea.

Another bill from Rep. Holly Hughes (R-Muskegon) proposing a new kind a port authority is being pitched with various “economic development” rationalizations. The measure passed the House in a bipartisan vote on September 22. It could deliver port revenue to politically well-connected developers while leaving taxpayers holding the bag if things go badly.

The owners of two privately owned port facilities in Muskegon are not amused at the prospect of competition from their own local government. One of them said in press reports that he and the other operator can easily handle any new demand for shipping cargo into Muskegon and adding another player would be counterproductive, and unfair too.

Hughes has struggled to justify how this legislation is a net plus for her region or the state. When pressed in a WJR radio interview, she told host Frank Beckmann to call someone else for details.

Lansing’s corporate welfare backsliding may be gaining momentum. The recent push began with a 2012 vote to deliver taxpayer dollars to Detroit Red Wings owner Mike Ilitch for a new stadium project. Last year lawmakers wrote a special law giving tax breaks to a Nevada company that wanted to use the moribund Steelcase “Pyramid” building near Grand Rapids for a data center.

Today, in addition to Hughes's legislation and the Gilbert proposal, there’s also a “public-private partnership” bill introduced by Sen. Mike Kowall. Like the port proposal this also could become a vehicle for delivering private profits for well-connected developers while taxpayers cover the losses.

In another disturbing echo of Michigan’s last “lost decade,” the renewed corporate welfare push comes after a series of tax hikes imposed on regular citizens, including vehicle registration and gas tax increases.

If the current year in politics has demonstrated anything, it’s that the public wants political elites to stop making special deals that benefit the system they are part of more than the public. Let’s hope Michigan lawmakers don't add fuel to that fire here.