State Senate Minority Leader Jim Ananich (D-Flint) wants to phase out the state’s former tax credit economic incentive program for good and use the money for other priorities, such as roads and schools.
The Michigan Economic Growth Authority (MEGA) may have wound down and no new tax credits have been granted since 2011. But the state remains on the hook through 2030 for hundreds of millions of dollars annually as the outstanding credits are cashed in by companies like General Motors and Fiat Chrysler. The credits can be claimed between now and 2032.
Ananich’s plan announced Tuesday aims to vastly shorten the time frame the state would have to keep doling out money. His proposal would cap MEGA payouts at $200 million in the first year it took effect, $100 million in the second year and then cease any more payouts by the third year.
It would do so by simply speeding up the phase-out of the Michigan Business Tax, which was replaced by a corporate income tax in 2011. Now-former GOP Gov. Rick Snyder said the new tax was fairer to businesses, and it amounted to a roughly $2 billion annual tax cut.
Tax credits granted while the MBT was in effect, however, continue to divert revenues from the state’s roughly $10 billion General Fund, as the nonpartisan Citizens Research Council of Michigan notes.
The MEGA credits were largely doled out during Michigan’s decade-long recession in the 2000s, during which the Big Three automakers struggled to stay afloat.
Ananich told the Advance on Wednesday it’s a vastly different time now.
“We just get basically a bill in the mail that says, ‘Here’s how much you owe us,’ and we pay it,” Ananich said of the challenge of budgeting with outstanding credits.
“I just think [with] the economy we have now, it’s a flawed concept. I think we should be looking at investing in talent and freeing up hundreds of millions of dollars for our roads,” he said. If we are prioritizing talent and roads right now, which I think everyone agrees we should … then I think we should do that with every available resource.”
Ananich told the Advance that state Sen. Tom Barrett (R-Potterville) has said he would co-sponsor the legislation, which he has yet to formally introduce, and that he will probably have other GOP co-sponsors.
Otie McKinley, spokesman for the Michigan Economic Development Corp. (MEDC), which administers state incentives, said the organization has no official position on the proposal by Ananich.
“MEDC recognizes that the budget is a key concern right now, and we know that funding conversations are ongoing. We will continue to monitor the progress of those conversations,” McKinley wrote in an email. “Our primary concern is continuing to ensure Michigan provides a business climate where companies of all sizes can locate and grow their business.”
The Michigan Strategic Fund, now the state’s mechanism for doling out incentives, puts the total number of MEGA credits the state remains on the hook for at about $7.3 billion. Deals with individual companies are confidential, however.
Gov. Gretchen Whitmer spokeswoman Tiffany Brown said the governor’s office is reviewing Ananich’s proposed legislation “and look[s] forward to working with anyone who is serious about working together to solve problems.”
Whitmer, on Monday, switched course and agreed with GOP legislative leaders to move ahead with finishing a Fiscal Year 2020 budget without a comprehensive road-funding plan.
Amber McCann, spokeswoman for state Senate Majority Leader Mike Shirkey (R-Clarklake), however, wrote in an email: “The Majority Leader is open to considering creative options to free up cash for roads, but [Ananich’s proposal] would not generate enough dollars to have a long-term impact.”
Ananich said that the proposal isn’t a silver bullet in fixing Michigan’s beleaguered roads or faltering education system. But freeing up around half-billion dollars a year over the next several years could make a dent, he said.
“I’m just trying to offer solutions. This is how we allocate our resources now and I’m saying we should do that a different way,” Ananich said. “The good thing about roads, there’s not a dearth of ideas. There’s just a problem with will and the will to get it done.”