House panel votes to end business tax credits

Chad Livengood
Detroit News Lansing Bureau

Lansing – The Michigan Business Tax and credits given to companies to subsidize jobs would be eliminated at the end of 2031 under legislation a House committee adopted Wednesday.

The House Tax Policy Committee approved a two-bill package prohibiting any additional business tax credits for companies still using the MBT and owed nearly $9.4 billion in tax credits over the next 16 years.

The panel’s chairman, Rep. Jeff Farrington, got an amendment added to create an “end date” for the MBT, which about 280 companies still use after the Legislature created a new business tax in 2011.

Other large companies with boards of directors have transitioned to a new 6 percent corporate income tax, while the majority of small firms no longer pay any state business tax. Instead, their owners pay the 4.25 percent individual income tax on their business profits.

“We wanted to make sure we put a date certain on (ending the MBT) while keeping our promises so that there isn’t a separate set of tax code for a handful of companies,” said Farrington, R-Utica.

Detroit’s Big Three automakers are among the largest companies promised billions of dollars in tax credits under the Michigan Business Tax in exchange for retaining 86,000 jobs and investing $5.5 billion in assembly plants and other facilities.

General Motors Co. and the Michigan Manufacturers Association recently opposed the legislation, with one lobbyist warning it could “disarm” Michigan in the interstate battle for jobs and capital investment. The MMA is the lobbying arm of GM, Ford Motor Co., Fiat Chrysler Automobiles NV and auto suppliers.

The Republican-sponsored legislation is the first move by lawmakers this year to rein in the Michigan Economic Growth Authority tax credits after refunds surged and caused the state’s general fund to plunge into a midyear deficit.

GOP lawmakers introduced the bills after The Detroit News reported that Republican Gov. Rick Snyder’s administration had handed out $391 million in additional business tax credits since 2011, even after Snyder railed against the MBT, calling it “the dumbest tax in the United States.”

“The people of Michigan were essentially told the MBT program is gone,” said Rep. Jim Townsend, D-Royal Oak. “Setting a date certain is certainly one way to kind of drive a stake through this beast and make sure it doesn’t live on in perpetuity.”

Republican lawmakers also have taken out their displeasure with the ballooning cost of business tax credits on the state agency that administers the program, slashing millions from the Michigan Economic Development Corp.’s budget.

The House Tax Policy Committee voted 12-0 in favor of the bills, with Rep. Paul Clemente abstaining.

Clemente, D-Lincoln Park, said he fears setting an end date on the MEGA tax credit program could harm Michigan’s chances of attracting future investment from companies still using the old tax system.

“I’m concerned because many of the companies we’re talking about are not just making Michigan investment decisions, they’re making national, regional and global investment decisions,” Clemente said after the committee meeting. “My personal feeling is that we need to maintain as many tools in our tool kit to be competitive with other states, regions and countries that look at these jobs as being true generators of economic development.”

Committee Republicans rejected an amendment Townsend sponsored that would have prohibited the Michigan Economic Development Corp. from lowering the capital investment or number of jobs required for companies to claim a credit.

“I’m just trying to say you can’t change these terms to make them more liberal and easy to meet,”

The Detroit Regional Chamber lodged its opposition to the legislation, but a representative for the business group did not testify Wednesday.

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