Tilt from Tax Cutting to Corporate Welfare Renews Failed Approach to Economic Growth

Lawmakers face a number of corporate welfare proposals

During Michigan’s economic “Lost Decade” of the 2000s, state government seemed to have just one response for crushing declines in income and employment that cost about 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 Michigan business and income tax increases imposed in 2007, and smaller exactions, such as 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 been an improvement 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 or reform 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. He has raised some concerns about a recent proposal that would help real estate developers finance large projects using taxpayer dollars, but so far has not taken a public position on the proposal.

Fiscal analysts don’t know yet how big a hit state revenues would take from this proposal, but the measure promises a huge wealth transfer from taxpayers to downtown Detroit real estate developers, such as Dan Gilbert. But that’s not the only scheme percolating under the Michigan capitol dome.

Rep. Holly Hughes (R-Muskegon) is the lead sponsor for a cronyist port authority bill being pitched with the usual “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 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.

The bill also holds out the promise of benefiting another well-connected special interest, Consumers Energy. The utility owns a closed Muskegon plant with property it would like to sell. Hughes’s bill would potentially raise the price of that property artificially. Consumers had testified in support of it, but then shifted to a “neutral” position on October 17.

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 Beckman 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 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 profits for well-connected developers with potentially big losses for taxpayers.

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 is sick to death of political elites putting their own careers and special interest politics above the interests of the state and nation. If Michigan lawmakers want to bring that revolt to galloping boil in this state, they are on course to do so. Let’s hope they instead step back from this ledge.