(The Center Square) – A bipartisan bill package introduced to the Michigan Legislature this week aims to eliminate taxpayer handouts to out-of-state companies.
The bills aim to create an interstate compact between Midwest states, which would establish a cease-fire in multi-million dollar tax breaks and other government subsidies to incentivize companies to sometimes move as few as 20 miles.
The Michigan Economic Development Corporation (MEDC), which hands out taxpayer money to private companies, argues if Michigan doesn’t dole out funds, another state will. The MEDC hasn’t yet responded to a request from The Center Square for comment.
Sen. Jim Ananich, D-Flint, sponsored SB 524. Under the language, a state in the compact would agree not to lure companies across state lines via taxpayer subsidies. The agreement wouldn’t be retroactive.
Sen. Aric Nesbitt, R-Lawton, sponsored SB 523, which seeks to bar the Michigan Strategic Fund from supporting economic development if it would violate the interstate compact.
“Regular taxpayers bear the burden when states give sweetheart deals to specific companies,” Nesbitt told The Center Square in an email. “An interstate compact will enable our state to end these destructive deals without losing our competitive advantage.”
John Mozena, president of the Center for Economic Accountability, a nonprofit organization for transparent economic development policy, told The Center Square taxpayer-funded subsidies frequently fail.
“Michigan should absolutely join any group of states that agree to get together and end expensive corporate welfare handouts,” Mozena wrote in an email. “It’s long past time for us to stop throwing money away on tax breaks that evidence shows over and over again don’t actually create jobs or help the state’s economy, and this interstate compact would be an effective way to make that happen. It’s especially good to see how broad the bipartisan coalition is behind these bills, with legislators who agree on very little on so many other topics coming together across deep partisan divides to stand up for the best interests of Michigan’s communities.”
For example, Mozena said, the state in 2019 approved a $7 million taxpayer handout to Acrisure Insurance to move its headquarters from Caledonia Township to downtown Grand Rapids, or roughly 21 miles.
“For so long, politicians and bureaucrats who benefit from running these programs have claimed that we can’t just ‘unilaterally disarm’ ourselves of subsidies, even though when you’re constantly shooting yourself in the foot like Michigan’s economic development agencies have done then yes, disarming is a good idea regardless of what anybody else is doing,” Mozena said. “But here we have a meaningful opportunity for truly mutual disarmament, based on the successful model that European countries adopted to end cross-border corporate welfare there. There’s no reason why Michigan shouldn’t be part of that movement.”
James Hohman, director of fiscal policy at the free-market Mackinac Center for Public Policy, backed the bills.
“States should compete with one another by providing a healthy business climate, not by offering handouts,” Hohman said in a statement. “It’s past time to end the ineffective practice of using taxpayer dollars to benefit a few select businesses. With this legislation, policymakers are taking necessary steps that would allow states to mutually agree to stop wasting money on a tactic that has been proven to be ineffective.”