Lansing — A bipartisan plan that would offer tax incentives for large businesses to grow or relocate in Michigan is back in the state Senate, and supporters are making a bold new promise: It wouldn’t just create jobs, it would create “good” jobs.
The revised legislation, reintroduced this week after stalling late last year, would allow up to 15 businesses a year to capture a portion of income taxes paid by new hires if they successfully create hundreds of jobs in Michigan.
In a new wrinkle, the jobs would have to pay at least the average regional wage, which can range between $18.57 and $27.77 per hour in parts of the state.
Supporters say it would help Michigan land big job-creating companies or expansion projects, giving it a new weapon in an increasingly competitive arms race against other states and countries. And the jobs wouldn’t pay the minimum wage of $8.90 per hour.
“We know top competitors like Ohio and Indiana, and Southern states like Kentucky and South Carolina, are working aggressively to court our companies and attract new ones to their states every day,” said Sen. Jim Stamas, R-Midland.
“It’s about good jobs. It’s about good wages, plain and simple.”
Stamas is a lead sponsor on the package, along with Sens. Wayne Schmidt, R-Traverse City, and Steve Bieda, D-Warren.
Under the legislation, qualifying companies could keep up to half of personal income tax withheld from their new employees for 10 years if they create at least 500 jobs paying at least 100 percent of the average regional wage.
A qualifying company could capture all of new employee income taxes for 10 years if they create at least 250 jobs paying at least 125 percent of the average regional wage.
The Michigan Strategic Fund could approve up to 15 projects a year, and the total value of incentive commitments could not top $250 million at any one time.
“If they don’t bring the jobs to our communities, they get zero,” Stamas said this week in testimony before the Michigan Economic Development and Investment Committee, which debated but did not vote on the bills. “These are new jobs, documented jobs, audited on a yearly basis.”
The revised plan was rolled out to great fanfare Thursday in Lansing, where a growing coalition of community economic development leaders and business executives joined sponsoring senators for a press conference organized by the Truscott Rossman public relations firm.
Gov. Rick Snyder and Senate Majority Leader Arlan Meekhof support the legislation, and supporters have launched a new website to tout it. But the bills still face an uncertain future in the Republican-led state House.
House Speaker Tom Leonard, R-Dewitt, has prioritized individual tax cuts this year and been non-committal about business and development incentives. Asked Thursday about the Senate legislation, he said he had not seen or read it yet.
The proposal faces opposition from the free-market Mackinac Center for Public Policy and conservative advocacy group Michigan Freedom Fund, which support low and flat taxes rather than incentives.
Supporters “know they had some problems in the House,” said Freedom Fund director of operations Tony Daunt, who added his group will continue to share its concerns with members.
“If tax relief is a good policy — and we believe it is — then we should do things that are broad-based and apply to everybody, not targeted credits like this that have a history of being abused and turning into long-term liabilities for the state.”
Snyder and the Republican-led Legislature scaled back business incentives as part of a 2011 law that simplified the tax code, scrapping the Michigan Economic Growth Authority program that had been expanded in an attempt to keep jobs in the state during the Great Recession.
Outstanding MEGA credits can be redeemed through 2032. They cost the state more than $900 million in fiscal year 2016 and are projected to total $650 million this year.
Citing the costly MEGA program, Snyder has traditionally shied away from new business incentives. But he signaled a shift late last year when he backed an earlier version of the tax incentive legislation reintroduced this week.
“I want to be clear, this is not a MEGA,” Stamas said Thursday, attempting to draw a distinction between the old program and new proposal. “This is not a refundable tax credit. It’s not incentivizing retaining the jobs. This incentive is to grow hundreds of new jobs in our state that are good-paying jobs.”
Oakland County joins push
Supporters say Michigan’s current array of tax incentives can help stimulate small projects but are not designed to help the state lure major employers.
Dan Foster, a Michigan resident and national site selector for the Newmark Grubb Knight Frank commercial real estate firm, said in recent years he’s worked with over 100 companies looking to relocate or expand.
“Out of those 100, Michigan has probably been on the list three times, and they haven’t made the finalist list. Was it because of incentives? I think that’s part of it.”
Michigan “is simply losing right now” in attracting major job creators, said Deputy Oakland County Executive Matt Gibb, who championed the legislation Thursday in Lansing.
Gibb told reporters the proposal could boost Oakland County’s efforts to lure a “major defense industry” project to Pontiac and stave off fierce competition from other states.
“We’re doing everything we can to incentivize that project,” Gibb said, noting options for property tax abatements and workforce training funds allowed under current state law.
“There’s people behind the scenes … that do the hard work of trying to figure out the puzzle pieces of putting these projects together. In Georgia, that’s competing for this right now, they’re just writing a check.”
Gibb declined to confirm details of the defense project, but Crain’s Detroit Business reported that aviation company Williams International Co. LLC, based in Commerce Township, is considering plans for a new manufacturing facility at the sprawling site of a former film studio.
“We lose projects of this nature five or six or seven times every year,” Gibbs said, noting that Oakland County probably has a more aggressive economic development program than most other communities in Michigan.
He pointed to Fuyao Glass, a Chinese auto industry supplier with a plant in Orion Township that considered building a new manufacturing facility in Michigan but instead chose Ohio, which offered both incentives and the keys to a vacant General Motors plant.
Fuyao celebrated the opening of its new Ohio facility in October, launching it with 2,000 employees.
“What we’re competing against is free dirt and millions and millions of dollars,” Gibb said.