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House OKs tax incentives for big developers

Michael Gerstein
The Detroit News

Lansing — Big developers across the state such as Quicken Loans Chairman Dan Gilbert could save more than a collective $1 billion in taxes they wouldn’t have to pay for new projects under a plan the House overwhelmingly approved Thursday.

Most GOP and Democrat lawmakers backed legislation that would offer tax incentives to companies developing on blighted or long-vacant land, with mostly conservative Republicans voting no. The plan would let developers withhold tax money from new revenue raised by the development that would otherwise go to the state if developers went forward with such projects under current law.

Twobills in the package passed 85-22, andtwo were approved 83-24. They allow developers to capture up to $1 billion in income and sales tax, but there's no cap on the amount that could be captured from property taxes, according to Howard Heideman, an economist at the Treasury Department.

“This bill is not big government central planning. This bill is a ground-up effort that is supported by over 75 local communities and local organizations across this state,” said Rep. Jim Tedder, R-Clarkston, chairman of the House Tax Policy Committee.

Tedder reported receiving $2,500 from a Quicken Loans executive last year, according to campaign finance reports. From 2009-16, employees of companies and groups backing a prior version of the tax incentive plan donated a combined $2 million to committees tied to candidates for the state Legislature, according to a 2016 report from the Michigan Campaign Finance Network.

Critics said Michigan already offers enough incentives to companies and argued the plan is another example of government picking winners and losers with government money.

Rep. Martin Howrylak, R-Troy, called it “nothing more than a transfer of wealth” from the working class to “selected special interests” and an example of “crony capitalism.”

Democrats and Republicans alike said urban communities such as Detroit, Pontiac and Saginaw need to offer developers such tax incentives to spur new economic growth and revive derelict properties.

Supporters of the plan — including Gilbert and Pontiac Mayor Deirdre Waterman — say it would boost new projects in cities across the state that wouldn’t have otherwise come to fruition because it’s expensive to revitalize blighted land. They say the state isn’t losing any money because the incentives capture part of new tax revenue created by the projects that developers don’t have to pay.

The bills could jump-start development projects worth $2 billion to $3 billion that Gilbert has planned in Detroit, including a project on Woodward where J.L. Hudson’s department store used to be. Pontiac hopes it would revitalize the long-vacant Silverdome.

“This is not money that we’re giving away; this is money we never had,” said Andy Schor, D-Lansing, who is also running for Lansing mayor.

A new report from the Pew Charitable Trusts said Michigan lags other states in making sure tax incentives for companies actually lead to more jobs and economic growth for the state.

“Michigan has shifted its economic development strategy in recent years, investing heavily in tax incentives at some points and scaling back at others, Pew said. “Because the state lacks an ongoing process for evaluating incentives, however, it made these shifts without adequate information about whether these programs were working or how they might be improved.”

A project would require approval from the local government representing the area in which it would happen and the Michigan Strategic Fund, an arm of the private-public Michigan Economic Development Corporation. The State Treasurer would also have to sign off on the plan.

Opponents also said there’s no guarantee the tax breaks would go to projects that wouldn’t happen without the state aid.

“We do not represent capital. We do not represent corporations. We represent the citizens of this state,” said Rep. David LaGrand, D-Grand Rapids.

But LaGrand “reluctantly” voted for the package.

The bills now go back to the Senate for a final approval before being sent to Gov. Rick Snyder, who supported a version of the plan last year. The Senate previously approved the legislation.

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Twitter: @MikeGerstein