House votes to end business tax credits in 2031
Lansing — The Michigan House on Thursday overwhelmingly voted to prohibit future tax credits for companies still using the Michigan Business Tax and end the subsidies after 2031.
The House’s bipartisan action represents the first efforts lawmakers have taken to contain a $9.3 billion long-term liability that has ballooned in recent years, poking holes in the state’s general fund budget.
The legislation would prohibit Gov. Rick Snyder’s administration and future governors from amending tax credit deals with companies that would increase the value of the credits or extend their redemption beyond 2031.
Under the legislation, the Michigan Business Tax tied to the credits would end on Dec. 31, 2031.
Rep. Lee Chatfield, one of the bill sponsors, said the legislation is necessary to prevent the cost of tax credits mostly awarded under former Democratic Gov. Jennifer Granholm from further escalating for future taxpayers.
“We owe it to them to clean up the mess of past administrations,” said Chatfield, R-Levering.
The Republican-controlled House voted 105-5 and 104-6 in favor of House Bills 4333 and 4334. The bills now head to the GOP-run Senate.
The bills aim to curtail Michigan Economic Growth Authority tax credits that have been awarded to some of the state’s largest employers for creating or keeping jobs in Michigan, including Detroit’s Big Three automakers. MEGA tax credits are awarded by a state board and administered by the Michigan Economic Development Corp.
Rep. Andy Schor, D-Lansing, voted against the legislation after the Republican majority wouldn’t allow an amendment he sponsored to let the House and Senate appropriations committee approve or reject added tax credits in the future.
Schor said he wanted to build in a “safety valve” to give General Motors Co. or other automakers flexibility in deciding where they shift jobs and assembly plant investments.
“I have a GM plant in my district and one nearby,” Schor said. “What if in two years they want to bring 1,000 jobs (to Lansing) and they need to adjust their MEGA?”
“I have concerns that we are not leaving ourselves enough space to compete for new jobs.”
Rep. Joe Graves, R-Argentine Township, also voted no, saying he wanted to make future tax credits subject to approval by the Legislature.
“That way there’s a buy-in (to the project),” Graves said.
The legislation does not prohibit future governors and lawmakers from offering different kinds of economic incentives to companies to spur job creation, said Rep. Gary Glenn, R-Midland.
“It simply freezes in place this one mechanism,” said Glenn, the other bill sponsor.
State lawmakers were caught off guard earlier this year when a surge in businesses redeeming MEGA tax credits required $325 million in mid-year budget cuts and fund shifts.
Republican and Democratic House members are considering other changes to the MEGA tax credit program that would bring more “transparency” to the redemption process so state officials aren’t caught off guard again, Glenn said.
“This is just the first step,” Glenn said.