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Michigan Senate approves $1.6B in tax capture

Hire Michigan Fund would create annual uncertainty in general fund

What’s old is new again. The Michigan Senate on Tuesday approved $1.6 billion in tax capture credits through 2038, reviving and rebranding a program from the time of Gov. Rick Snyder.

What had been the Good Jobs for Michigan program in the Snyder years has been recast as the Hire Michigan Fund. Both programs operate the same way: The company that is awarded a deal gets to withhold income taxes from employees’ paychecks and keep the money for itself. Those employees’ taxes are captured by the company.

From 2017 to 2019, the Good Jobs for Michigan program was authorized to give a total of $200 million in tax capture deals, said James Hohman, the Mackinac Center’s director of fiscal policy. The state ended up approving seven captures for $188.4 million, accounting for 9,500 jobs.

The Hire Michigan Fund is a bit bigger. Rather than face a $200 million lifetime cap, the fund can approve up to $125 million in tax capture deals each year through 2038.

That amounts to a $1.625 billion loss in general fund revenues in a state where the administration is fighting the Mackinac Center in court to prevent a $700 million-per year income tax cut.

For the year, lawmakers have considered nearly $6 billion in selective subsidies. This does not count the $1 billion in lawmaker earmarks that have become an annual tradition.

The tax capture program will pay companies to create jobs they would have created without subsidies, Hohman said.

“We know whether selective subsidies are effective. They’re not,” Hohman told Michigan Capitol Confidential. “Most jobs happen without companies needing subsidies.”

The program would cost each Michigan household about $50 per year if enacted into law, Hohman said.

What the Senate passed is a three-bill package, Senate bills 579, 580, and 581.

The bills now head to the House. They must pass the House and Senate in identical forms and be signed by Gov. Gretchen Whitmer before they are enacted.

Because the bills are tie-barred, all three must be enacted for any of the three to take effect.

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.