Letter: Tax credits don't change business realities

The Detroit News
Backed partly by state tax incentives, Ford Motor Co. is renovating the Michigan Central Depot and making it the anchor of a Corktown campus devoted to developing next-generation technologies of mobility, autonomy and electrification.

In his Nov. 11 column on our state's business tax incentives, "Michigan business tax-break debate must reckon with reality," Daniel Howes makes the fundamental mistake of assuming that corporate tax credits and other incentives work as advertised. In reality, they don't.

Howes writes that "incentives are built on a crucial assumption: that new jobs create new tax revenue." However, that's not the truly crucial assumption being made. Rather, the actual assumption these programs are based on is that the incentives change what a business was already going to do anyway — and the evidence is that they very rarely do.

Businesses certainly do factor tax incentives into their decisions on where to build or hire, but incentives are only one of dozens of factors in play, ranking far behind business-critical concerns like whether a company will be able to find the right workers; how much those workers will cost to employ; where its customers are; what the competitive landscape is like; whether the infrastructure is there to support their business requirements and more.

For a real-world example of this, look no further than Amazon's "HQ2" in the Washington, D.C. area. Maryland's offer included billions of dollars more in tax credits than Virginia's did, and the two finalist sites were less than ten miles apart. Yet Amazon left all that free money behind in Maryland because other factors such as Virginia's education system and general tax and regulatory climate were more important to the company.

Howes is correct that Michigan is generally bad at the basics of good government, but the answer to that is not to drain resources from important government services by cutting big corporations and politically connected developers a break on paying the same taxes as everybody else.

Tax credits rarely turn a bad deal into a good deal, and companies will still take advantage of a good deal even if no incentives are part of it. That's the true reality of our business tax-break debate, and it's why we should be focusing on making Michigan a better place for anybody who wants to run a good business that creates good jobs, rather than subsidizing a chosen few.

John C. Mozena, president, Center for Economic Accountability

Grosse Pointe Woods