Michigan lawmakers OK $1.5B in business incentives, relief
Opponents in both parties called the incentives “corporate welfare”
Michigan legislators late Tuesday passed a $1.5 billion bill with state incentives to land major business projects, including an electric vehicle battery factory that General Motors wants to build in the Lansing area.
Once Gov. Gretchen Whitmer signs the funding and related bills into law, $1 billion in state revenue will go to the new Strategic Outreach and Attraction Reserve Fund. Legislative budget committees would have to approve transfers from the account to new site readiness and “critical industry” funds before the state’s economic development board could distribute grants, loans and other assistance to companies.
“Thanks to the effective collaboration of legislative leadership in both parties, our state will be competitive for every dollar and every job for years to come,” the Democratic governor said in a statement. The funding legislation was approved on 25-11 and 78-25 votes in the Senate and House before lawmakers adjourned for the year.
As part of the deal, she will sign $409 million in aid for restaurants and other businesses that lost money in the pandemic. The Republican-controlled Legislature also approved a $75 million tax cut for businesses that pay taxes on nonindustrial equipment and personal property. The exemption, based on the value of the equipment, would rise from $80,000 to $180,000 per parcel.
“We are in a period where there are increasingly large opportunities that will have generational and transformative impact. This allows us to be in better position to win those deals,” Quentin Messer Jr., CEO of the Michigan Economic Development Corp. and president and chair of the Michigan Strategic Fund, said of the $1 billion in incentives.
The Lansing City Council on Monday began approving local tax breaks for the proposed GM project, which could cost up to $2.5 billion and employ as many as 1,700 workers. Business leaders and lawmakers have said Michigan is in the mix for three other big deals that could be announced as soon as January.
Michigan-based automakers qualify for generous job-retention tax credits under an old economic development program, and some businesses were awarded tax incentives through a newer initiative that expired in 2019. But supporters of the new incentives say the state cannot compete with what other states are offering, despite criticism that such corporate subsidies are unfair to other companies and could be better spent on government services.
Talks about boosting incentives had been underway but intensified in recent months after Ford Motor Co. announced plans to build an electric vehicle assembly plant and three battery factories in Kentucky and Tennessee.
“The Ford announcement felt like a punch in the nose. ... Michiganders have always responded to every punch with a more forceful counterpunch,” Messer told The Associated Press.
Opponents in both parties, including Democratic Rep. Cynthia Johnson of Detroit, called the incentives “corporate welfare” and said there is no guarantee that any new jobs will last in the long term.
“Why do the wheels turn so fast for corporate America? When they come in here and they demand something, they get it like that,” said Democratic Sen. Jeff Irwin of Ann Arbor. “What about the people who are suffering in silence with mental illness? What about the people sleeping on the street? What about the small businesses who are trying to figure how (to) pay for health care?”
But Sen. Ken Horn, a Frankenmuth Republican, said residents are counting on Michigan to be prepared for the auto industry’s shift from internal combustion engines to zero emission electric power.
“This is our opportunity to make a difference. This is money well spent,” he said, saying the incentives will give Michigan a “better than 50-50 shot” at securing all four “serious” projects on the table, including another auto-related deal.
The grants for pandemic-afflicted businesses — to be funded with federal discretionary pandemic aid — and the tax cut were welcomed by groups representing small businesses. Grants to qualifying businesses will be tied to what they paid in 2020 for property taxes or rent, unemployment insurance taxes and liquor fees, inspection fees and other fees.
Critics questioned the tax reduction’s effect on municipalities.
“By repealing this tax in perpetuity with no replacement to local communities beyond the first year, you are directly defunding the money that goes toward public safety,” said Sen. Jeremy Moss, a Southfield Democrat.
Republican Senate Majority Leader Mike Shirkey pledged to work to devise a permanent funding solution over the next year.