Naysayers can't deflect incentives’ effectiveness

April 12, 2010
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It is no surprise that gubernatorial candidates are issuing sound bites playing to party politics, especially among the crowd of Republican contenders; it’s what is expected. Town hall meetings, however, hosted by the Center for Michigan the past two years clearly indicate a high level of frustration in that “usual” scenario and the resulting gridlock which is in part to blame for Michigan’s economic paralysis.

The fools’ game now threatens Michigan’s tax incentives as candidates clamor for an end to one policy that has added jobs in this state. The West Michigan business community is undoubtedly conservative, and suffers no fools. Many of those who have chimed in to support such a notion are those in the service sector who see no benefit. West Michigan businesses that make things — manufacturers — are as appalled as economic development directors for candidate dismisiveness of the jobs created by such incentives.

Grand Rapids Business Journal in 1996 recognized Gov. John Engler and city leaders with the Newsmaker of the Year Award for the impact of incentives offered through Renaissance Zones, which undoubtedly contributed to the building boom that saved some big old buildings in Grand Rapids. Engler also created the Michigan Economic Development Corp. in 1995, successfully guided by Doug Rothwell, who now heads Business Leaders for Michigan.

Last week the W.E. Upjohn Institute for Employment Research released its independent study on Michigan’s MEGA tax credit program, which showed that the incentive program since 2007 had added 18,000 jobs in the state, and that the cost of the program is no more than $3,500 per job created. Further, the program has increased tax revenues faster than it has increased public service costs, and “the fiscal benefits for the state offset about two-thirds of the financial costs of the MEGA credits,” according to one of the study’s two researchers, George Erickcek. For every job created through the incentives, 3.88 additional jobs were created in a domino effect elsewhere in the economy, in such sectors as supporting industries and utilities.

The Right Place Inc. regional economic development agency showed that, in 2009 alone, an additional 4,200 jobs were created through incentives offered to companies in the Grand Rapids area. From Attwood and Keebler to Holland’s impressive landing of battery plants, incentives are the No. 1 factor bringing jobs to this area. As Right Place President Birgit Klohs indicates, it is a national incentives race to provide jobs. In a recent WGVU radio broadcast Klohs noted the incentives are more than $3 billion less than what the state has paid in unemployment benefits.

The Upjohn study also made thorough analysis of the impact of MEGA versus using the resources to cut Michigan’s business tax. The report showed that by 2007, MEGA had created 16,700 more jobs than would have been created by cutting the tax. Co-author Tim Bartik noted, “MEGA is more targeted at business investment decisions with high multiplier effects.”

This business community cannot suffer the fools who would diminish the job gains.

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