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Opinion: Business handouts unfairly waste Michigan's money

Dick DeVos and Matthew Haworth

Did you know that hundreds of millions of dollars are taken from the state budget every year to benefit a few businesses?  Funds that could support the important priorities of all Michigan residents, like infrastructure and education, and broadly help all businesses and residents in this challenging environment are instead gobbled up by a handful of corporations as a result of handout programs approved by our elected state representatives. It’s wrong and it shouldn’t continue. 

Exterior photo of the Michigan State Capitol in Lansing, Wednesday, July 15, 2020.

That’s why we’re calling on representatives in the state legislature to resist any suggestion of creating another fund for so-called “business incentive programs” in the remaining days of the legislative calendar. Our state’s tab for past promises is already several billions of dollars and has become a weight pulling Michigan down as we attempt to solve challenges ahead. 

We believe that all businesses should pay their fair share and contribute to our communities. Furthermore, if the legislature truly wants to have a positive impact on the business climate, it should focus its attention on creating an environment that is so attractive for all fundamentally that these one-off “corporate welfare” handouts become unnecessary.

Here’s how the system currently works, using 2016 data for example purposes:  Michigan businesses pay nearly $1 billion in corporate income taxes annually. It is a significant contribution, and these funds could pay for important priorities.

Instead, nearly 90% of these funds are diverted to a few select businesses based on the promise to move or stay here and employ people. It is highly inefficient and ineffective, and amounts to taking money from Michigan job providers to subsidize their competitors, leaving longstanding employers with higher costs. 

It’s destructive as well, as the siphoning of funds to benefit a small group of businesses leaves all of us with underfunded priorities that could be addressed with existing revenue. For example, we all agree that transportation infrastructure and quality K-12 education are important for Michigan’s current and future success. The funds handed out through these programs could instead be used to invest in citizens’ shared priorities, benefiting all Michigan residents and Michigan employers. 

Some may argue that such incentives are simply the cost of doing business for a government entity in modern times. We couldn’t disagree more. The research supports our thinking, too. According to Timothy Bartik from the Upjohn Institute for Employment Research, in a large majority of instances (75%) a “firm would have made the same new facility location decision, or same expansion decision, even if no incentive had been provided.” In other words, as Bartik states, “at least 75 percent of the time, incentives are all costs, with no job creation benefits.”

It all leads us to conclude that pitting communities or states up against one another simply doesn’t pay off, and we hope Michigan’s participation in this game will end. A bipartisan group of elected officials in as many as a dozen other states seemingly have concluded the same thing, and earlier this year began to explore a non-aggression pact to halt tax incentive bidding wars for employers that often fail to generate the investments and jobs that are promised. This pact is a commendable pursuit and worthy of consideration in Michigan as well.

We realize our stance regarding business incentive programs is not shared by all in the business community and even some of the groups that we are part of as members may have a different stance. We are speaking here as individuals and not as a part of any group. 

We want a simple, fair and efficient tax code along with reliable and effective state services, and believe business incentive programs equate to corporate welfare. These programs deny us the opportunity to make needed investments, are unfair for Michigan citizens and uncompetitive for Michigan employers. 

We urge elected officials to not support future business incentive programs and to consider further measures to limit future impact of any existing programs. The cost is already too high and too unfair to continue. 

Dick DeVos has spent his business career working in a variety of executive positions at Amway and The Windquest Group where he currently serves as its president. He was the Republican nominee for governor of Michigan in 2006. Matthew Haworth is the chairman of Haworth, a privately held global leader in the contract furnishing industry.