News Story

Pfizer Profits $21.5 Billion In 2017, Gets $32 Million Tax Break From Small Michigan City

Portage officials feared saying ‘no’ to city’s largest taxpayer

In 2017 Pfizer earned $21.5 billion in profits. For comparison’s sake, Ford Motor Co. earned $13.5 billion in profits in 2017.

In April, the global biopharmaceutical company was granted a property tax break by the city of Portage worth $32.1 million over 15 years. The tax break is for a facility expansion that is supposed to create 450 jobs within six years.

Pfizer got the special treatment because it employed 2,100 people in the city last year and is by far the city's biggest taxpayer. Portage officials feared that if they didn’t approve the deal, Pfizer might relocate elsewhere.

In the early 2000s, Pfizer employed 2,100 people at its Ann Arbor facilities, and company executives were sending similar signals to city officials there while seeking tax abatements. The Ann Arbor City Council eventually approved tax breaks worth $81 million over 20 years. But six years later, Pfizer shut down its Ann Arbor operations anyway.

“I do know that other sites were considered and Portage cannot afford to gamble with its largest employer and largest tax payer,” said Portage Mayor Patricia Randall in an email.

Randall spelled out why Portage leaders felt compelled to give Pfizer a 15-year tax abatement.

“It is important to remember that incentives are part of the decision matrix in our world today,” Randall said. “This Pfizer project will generate $1.7 million in local taxes every year for the next 15 years and will more than double in years following. This project will not only retain 200 jobs, but will create 450 new, high-paying jobs within the next three years.”

Randall said the other businesses in Portage would benefit from Pfizer’s deal.

“Many will be beneficiaries of new jobs created by Pfizer. Each dollar invested in our community doesn’t disappear; it creates a domino effect when earned, spent, taxed, and invested in our schools, infrastructure, housing market and services. This adds stability to our city and entire region, and business owners recognize and embrace this,” Randall said.

According to the city’s 2017 comprehensive financial annual report, Pfizer employed 2,100 people in Portage, second in the city only to medical hardware company Stryker, which employed 2,300.

Ann Arbor’s population was about 2.5 times greater than Portage as of the 2010 Census (114,133 versus 45,360).

The ongoing job churn that is a regular feature of Michigan's economy gives some perspective for those jobs numbers. Statewide, 199,000 jobs that existed in April 2017 had disappeared by June. During the same period, 215,000 new jobs were created in Michigan. Similar losses and gains occur every quarter, in good times netting-out to overall employment increases and in bad times statewide job losses.

Ann Arbor seems to have recovered from the lost Pfizer jobs. Total employment in the city was 63,507 in 2001, when its officials approved Pfizer’s tax abatement. Ann Arbor’s employment was 62,954 in 2017. The city’s unemployment rate was 3.2 percent in 2001 and was 3.0 percent in 2017.

Ann Arbor has experienced a decline in median household income after adjusting for inflation. In 1999, the median Ann Arbor household income was $45,923, which would be $66,158 in 2016 dollars. Ann Arbor’s actual median household income in 2016 was $60,745.

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.