Bills Would Ban Keeping Taxpayer Handouts To Corporations Secret
A handful of companies are getting billions, but citizens are forbidden to know who or how much
Two bills introduced in the Michigan House of Representatives last month would require the state Department of Treasury to reveal which companies are receiving incentives promised through the now-moribund Michigan Economic Growth Authority.
Starting in 2009, the Michigan Economic Development Corporation, which managed MEGA, stopped letting taxpayers see which companies received the billions of dollars the state awarded in incentives or how much the incentives were worth.
For much of MEGA’s 15-year existence, the MEDC did disclose which companies were cashing in credits as well as the value of their credits.
While MEGA was suspended in 2011, companies are still redeeming the credits they were awarded. In fiscal year 2017, Michigan paid out $750 million in incentives to an unknown number of unnamed companies, according to the Senate Fiscal Agency. In September 2017, there was still $7.3 billion worth of MEGA credits that could potentially be redeemed, according to the Office of the Michigan Auditor General.
House Bill 5060, sponsored by Rep. Jim Runestad, R-White Lake, would change the confidentiality law that keeps state officials from disclosing the names of companies receiving MEGA subsidies.
House Bill 5061, sponsored by Rep. John Reilly, R-Oakland Township, would require the Michigan Department of Treasury to name the companies and the amount each received either in payments or forgone taxes under MEGA.
In a statement, Reilly called the lack of transparency for MEGA credits a serious issue of public interest.
“Taxpayers have the right to know who is getting their money, to inform them whether this is the best use of it,” Reilly said. “My legislation would make these figures known by making them open to the Freedom of Information Act.”
Both bills have Democratic and Republican co-sponsors. House Bill 5060 has been referred to the House Appropriations Committee, while House Bill 5061 has been referred to the House Tax Policy Committee.
State law prohibits Treasury Department employees from discussing any of the specific details surrounding the administration of a tax, including tax information about individual companies. And according to a state auditor general report, reporting the estimated tax credit or cap on credits for General Motors, in particular, would violate the Michigan Strategic Fund’s confidentiality agreement with the company.
Both bills would allow taxpayers to see the value of tax credits cashed in by Michigan’s major automotive companies. In 2015, Ford agreed to a $2.3 billion cap on its remaining tax credits and Fiat-Chrysler agreed to a $1.7 billion cap, according to The Detroit News. In February 2015, the MEDC valued General Motor’s remaining tax credits at $2.1 billion.
According to James Hohman, director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy, Michigan spends more on MEGA business subsidies than it does on state police, yet citizens aren’t allowed to see which companies are receiving payments.
“MEGA is a multibillion dollar transfer from Michigan taxpayers to a handful of companies selected by state bureaucrats,” Hohman said.
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.