Howes: Michigan business tax-break debate must reckon with reality
As false choices go, the debate in Lansing about extending tax breaks for big-ticket projects ranks with the best of them.
Business is pushing to continue a program enabling companies to retain at least a portion of the state income taxes paid by new hires staffing new developments. But the effort's predictably running into charges of “corporate cronyism at its finest,” in the words of one Democratic lawmaker — and the belief that public spending on infrastructure and public education is the best way to stimulate economic growth in Michigan.
There’s only one problem with that: Republicans and Democrats in Lansing have a demonstrated track record of under-delivering. Roads in the state that put America on wheels remain an embarrassment; educational attainment in K-12 schools ranks among the worst in the country; public water systems grapple with lead-tainted water and the high cost of remediation.
None of that, and more, are inducements for business to invest in the state or its largest cities. Quite the opposite, which is why incentives like the Good Jobs for Michigan program are so critical to maintaining economic momentum a decade after the global financial meltdown and the historic bankruptcies of two Detroit automakers.
In an ideal world, cities and states wouldn't essentially pay business to invest in them, to create tax-paying jobs, to stimulate demand for related services that combines to create a virtuous circle of growth and spending. In an ideal world, the Michigan Legislature would reckon with its inability to deliver what Senate Minority Leader Jim Ananich, a Flint Democrat, calls "the basic blocking and tackling" of government.
But we don't live in an ideal world. We live in a competitive one, where economic interests vie with political priorities, mutual suspicion and a predisposition to doubting the motives of rivals. Opting not to compete is a legitimate, if often self-defeating, choice that equals lost opportunities.
Rival states would gladly plump for the chance to claim a new assembly plant, a technology campus built around autonomy and electrification, a marquee downtown development that promises to reshape the city's skyline and further validate its narrative of reinvention.
Capital is more mobile than any time in human history, turbocharged by digital reach spanning the globe. Meaning investors have choices, including mortgage mogul Dan Gilbert and Detroit's three automakers — which combined are committed to investing billions in the city that a lot of America gave up for dead.
Gilbert's real estate arm is not obligated to build on the Hudson's site, vacant since the '90s. General Motors Co. isn't obliged to convert its Detroit-Hamtramck Assembly into an electric-truck plant. Ford Motor Co. didn't have to buy the decrepit Michigan Central Depot and make it the anchor of the Blue Oval's next-generation technology campus in Corktown.
And Fiat Chrysler Automobiles NV could have expanded production capacity for its next-generation Jeep Grand Cherokee outside the city. But it, like the others, identified the business and political advantages that come from reinvesting in the home of the U.S. auto industry — and incentives help.
Still, skepticism is understandable. The Ford and FCA projects already underway are a stark contrast to the failure of Ilitch Holdings Inc. to make good on ancillary developments promised with its billion-dollar District Detroit, partially financed with public money.
Unfulfilled promises fuel doubts that business leaders are unreliable partners, but all business leaders are not created equal. With the notable exceptions of the Ilitch project and the notoriously difficult Moroun family, many high-profile projects are underway because today's leadership is biased toward doing what you say you'll do — and doing it at home.
The incentives are built on a crucial assumption: that new jobs create new tax revenue, and employers would not be entitled to any cut of that revenue until the jobs are realized. In other words, do what you say you'll do, and all sides win.
Until it realizes the utopia where incentives become unnecessary, the Legislature's job is to empower Michigan to compete for investment and hold would-be investors accountable for whatever public money they receive. Anything less would be unacceptable.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.