Snyder gets biz incentive win as Michigan woos Foxconn
Lansing — Republican Gov. Rick Snyder scored a significant victory Wednesday as the GOP-led Legislature approved a $200 million business tax incentive plan despite backlash from hard-line conservatives and opposition from House Speaker Tom Leonard.
The legislation could help Michigan as it competes with other states for thousands of potential jobs from Foxconn, a Taiwan-based electronics manufacturing giant that assembles the Apple iPhone in China and is considering sites for a new plant in the United States.
While Snyder will not discuss Foxconn negotiations publicly, he urged the House to vote on incentives during its only July meeting, warning that various job-creation opportunities “would likely disappear” without swift action on bills approved by the Senate in March.
The legislation would create a new tax incentive program, with maximum state commitments of $200 million for up to 15 qualifying companies at any one time. If they meet job-creation and worker wage requirements, those companies could keep some or all of the income taxes their new employees would otherwise pay to the state.
“Michigan has made a tremendous economic comeback in the past six years, and passage of this legislation sends the signal that we are pressing forward to ensure the strongest possible future,” Snyder said in a statement.
Michigan overhauled its tax code in 2011, lowering business taxes and moving away from “an overabundance on tax credits,” he said. The state is now “enacting forward-thinking policies that make us more competitive for new jobs and industries in a fiscally responsible fashion.”
The House approved the so-called “good jobs” package in a series of 71-35 votes, with support from a majority of Republican and Democratic legislators. The Senate signed off on House changes, sending the bill to Snyder’s desk for signature.
Snyder needed help from Democrats to get the incentive plan through the lower chamber, where Leonard personally opposed it but agreed to hold a vote if a majority of his caucus signaled support. The governor is expected to sign a separate teacher pension reform bill backed by Republicans in both the House and Senate.
Rep. Martin Howrylak, R-Troy, voted against the incentive legislation and blasted it as a form of “crony capitalism.”
“Here we go again, attacking the taxpayers,” Howrylak said in a floor speech, echoing a famous debate line from former President Ronald Reagan. “Here we go again, taking away from the poor and middle income and giving to a select corporate class.”
While supporters say the incentive plan is about more than Foxconn, the company’s potential development has added urgency. Wisconsin is also vying for a piece of the investment, and the Milwaukee Journal Sentinel reported Wednesday that a private jet believed to be connected to Foxconn was spotted this week in that state.
Senate Majority Leader Arlan Meekhof, R-West Olive, said he believes Michigan is still in the running for a Foxconn development but told reporters the company may end up picking more than one state for multiple new facilities it’s considering.
Michigan could still stand to gain between 3,000 and 5,000 jobs if the company chooses it, he said. “It’s significant, high-dollar jobs as well.”
The legislation will give Michigan a new tool to lure companies that may otherwise choose states with more generous incentives, said Rep. Jason Sheppard, R-Temperance, who voted for the bills.
“We live in a reality, a world today where we are essentially in an arms race, not only with our border states, but the entire country,” he said.
Forty Republicans and 31 Democrats voted for the measure in the House, easily topping the 55 votes needed for passage. Several Detroit Democrats voted for the bills a day after caucus leadership met with Snyder staff to discuss their own priorities.
“This is an opportunity to attract emerging industries and create thousands of new jobs in the state,” said Rep. Leslie Love, D-Detroit. “It’s an opportunity to bring people back who left the state when their jobs were eliminated.”
Leonard canceled a planned vote three weeks ago, alleging Snyder had cut a labor-related side deal that could “undermine” House GOP priorities. He and Snyder met behind closed doors Tuesday for what both sides called a “constructive” meeting.
Leonard did not talk to reporters after the vote, but he released a statement criticizing the package, which he said “allows the government to pick winners and losers” and is “simply bad tax policy.”
Rep. Lee Chatfield, who was also in the Tuesday meeting, said the governor satisfied Republican concerns over his negotiations with Democrats.
“We were guaranteed the passage of this bill did not mean the failure of any other bill,” said Chatfield, R-Levering, who voted against the package. “We did not feel that any of our Republican priorities were compromised.”
Rep. Brian Elder, D-Bay City, told reporters he was not aware of any deals with the governor but said he supported the bills after Democrats won amendments in committee, including a sunset provision that would prohibit new incentive awards after 2019 unless the Legislature votes to continue them.
“That’s why we were ready to pass this a month ago,” Elder said. “It’s unfortunate that we had to wait an entire month to create new jobs in Michigan, but Democrats are ready to do the work whenever we’re allowed to do it.”
The incentive plan represents a continued shift in philosophy for Snyder and legislative Republicans, who abandoned a larger-scale business incentive program in 2011. As recently as 2014, Snyder had called tax credits “the heroin drip of government” but more recently has argued Michigan needs a “closer” to woo large job creators to the state. Earlier this year, he signed tax incentive legislation to encourage large-scale redevelopment projects.
The new program would allow a company that creates up to 3,000 jobs with pay rates that match the average regional wage, or 250 jobs at 125 percent of the regional wage, to keep all new employee income taxes for up to 10 years. A company that creates 500 new jobs paying an average wage could keep 50 percent of employee income taxes for up to five years.
The business incentive planned was backed by various business groups but faced criticism from several conservative organizations that branded it as a form of corporate welfare. Some liberal groups also raised concerns over Foxconn’s history of workers’ rights violations in China that reportedly prompted employee suicide attempts and threats in 2010 and 2012.
“We are extremely disappointed in self-described conservatives in the state House who refused to approve income tax relief for everyday Michigan workers and instead, today, voted for crony capitalist tax giveaways to a few handpicked big businesses,” Tony Daunt, executive director of the Michigan Freedom Fund, said in a statement.