Lansing — Gov. Rick Snyder said Thursday he wants to reach “mutually agreed upon” pacts with companies holding billions of dollars in tax credits to bring more certainty to when they will be cashed in.
But the business-friendly Republican governor is trying to apply the brakes to suggestions from lawmakers that the state should walk away from nearly $9.4 billion in tax credits owed to about 240 companies for creating or retaining tens of thousands of jobs in the state.
“The goal should be to try to honor these agreements or, in the context that if there are changes, they’re mutually agreed to,” Snyder said in a Detroit News editorial board interview. “These are major job creators. They’ve helped bring us back economically in the state and we shouldn’t overlook that fact.”
Snyder said he wants to work with companies holding the business tax credits to “bring better visibility” and “transparency” to the tax credits, which will consume more than $500 million a year in general fund tax revenue until 2029. The final tax credits awarded under the Michigan Business Tax don’t expire until 2031, according to the Michigan Economic Development Corp.
The MEDC has asked companies to agree to redeem their credits in the year they were issued and give the state a three-year forecast on using tax credits to help governors and legislators budget for the subsidies.
But Snyder did not rule out pursuing legislation to put new rules in place for when the tax credits could be cashed in.
“I think the starting point should be what we can do in a mutually agreed-upon fashion,” Snyder said.
Mike Johnston, vice president of government affairs for the Michigan Manufacturers Association, said his members, which include Detroit’s three automakers, are open to helping state officials know when they will seek tax refunds.
“I think the companies would be willing to help with that forecasting and estimation so the state can do a better job with planning,” Johnston said Thursday. “They’re contracts, both parties signed them and both sides have to live up to the agreements – and the autos have delivered in spades.”
The Michigan Economic Growth Authority tax credits being redeemed by businesses at a rapidly increasing rate were largely awarded during the administration of Democratic Gov. Jennifer Granholm, although Snyder’s administration added $391 million in amended awards to companies. The tax credit program began under Republican Gov. John Engler.
In a Feb. 5 report, The News highlighted the cost of rising tax credits the Granholm and Snyder administrations awarded General Motors Co., Ford Motor Co. and the former Chrysler Group LLC to retain more than 86,000 jobs in Michigan. The tax credits were last valued in public records at $4.5 billion, but are expected to increase with rising employee wages and other compensation used to calculate the value of the tax credits, The News’ analysis showed.
But the redemption of tax credits has wreaked havoc on the state budget, causing angst among lawmakers from both political parties.
State Rep. Jeff Farrington, chairman of the House Tax Policy Committee, on Wednesday rebuffed suggestions from MEDC officials that the state cannot negate the tax credit agreements with companies.
“There is one way. You just get rid of the MBT,” said Farrington, R-Utica.
Johnston cautioned against such rhetoric.
“The Legislature ought to be careful not to give the appearance to reneging on agreements that would totally undermine their ability to do economic agreements in the future,” Johnston told The News.