New state tax better but not everything

August 12, 2011
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As far as The Right Place President and CEO Birgit Klohs is concerned, nothing on the planet did more damage to her organization’s effort to recruit high-quality jobs and wealth to the region than how the United States Congress handled the recent debt-ceiling negotiations over the past two months.

It was a deal that changed four times, was done in an atmosphere of absolute resistance to full cooperation, and led to a last-minute outcome that resulted in one downgrade and inspired little confidence.

“Businesses hate uncertainty, and there was a lot of uncertainty in those talks,” said Klohs. She added that businesses and financial markets worldwide came away very unimpressed as to how both political parties turned what previously was a procedural vote into a full-blown crisis.

Klohs made that comment and others before a receptive luncheon crowd at a recent meeting of the Rotary Club of Grand Rapids.

After explaining what The Right Place does, Klohs was asked what she thought of the new state business tax that becomes effective next year. “Will it help? Yes,” she said. “Will it be everything? No. We have only just pulled even with the other states. We still have to put a little sugar in the coffee.”

But even though the 6 percent corporate tax will replace the tremendously disliked Michigan Business Tax, which Klohs said she was glad to see go away, all of the incentives the MBT offered to businesses for expanding in and coming to Michigan also will be eliminated. Economic development organizations such as The Right Place depend on having incentives as a way to compete with the other groups looking to lure the same companies to their states.

“I don’t agree with laying down arms while the other states are reloading,” Klohs said.

Klohs said three businesses left Wayne County recently and moved to Indiana, a state that also has a conservative governor but one who believes in offering incentives. Those incentives, she noted, are changing from the standard tax breaks that have dominated her industry to cash. Klohs said Texas recently handed out $10 million as an incentive, and Michigan has to have some sort of program that allows it to compete with other states and to overcome the negative perceptions that others have about this state.

“We have to be mindful that our competitors are listening,” she said, while adding that she can’t draw new firms to areas that aren’t growing. “People still have an image of Michigan as it’s not a good place to be.”

That image, though, may be changing, and the change seems to be led by labor unions. Klohs said having union leaders publicly say that their workers’ groups are more interested in becoming partners with employers rather than adversaries is slowly changing the perception of the state’s work force. If the current auto talks go well, she felt that changing image will be reinforced.

As for the local labor force, Klohs said only 4 percent of it is unionized. As for its quality, she said it is mixed.

“We still have good people. But we’re going to have to retrain quite a few,” she said.

The lengthy recession has sidelined workers who used to be up to speed but now are behind the curve because companies have made technological advances that sidelined workers are unaware of.

“When you look at our unemployment, there are jobs out there that are going begging due to a lack of skills,” she said.

Klohs told Rotarians that her organization spends about 80 percent of its time assisting local companies instead of trying to draw firms located outside of the state and the country here.

“We’re still very strong in manufacturing. We’ve got to make something. We spend about 80 percent of our time helping them,” she said. “We are the premier organization that deals with business expansion.”

Expanding local businesses is the fundamental goal of The Right Place. Klohs said finding new customers for existing companies is what creates high-quality jobs and wealth for an area, and that can be done by exporting products that are made here and services that are offered here to other regions and nations.

Klohs added that a second bridge between Detroit and Windsor is a vital aspect of the state’s economic future, as Michigan businesses send the majority of their exports to Canada.

“Wealth is created when a product is exported out of the area and new money comes back,” she said. “Our mission is to create quality employment and wealth.”

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