Rural grants don’t add up – Mackinac Center

In an ongoing effort to reestablish a closed program offering handouts to large corporations, the bill’s sponsors lifted about 90% of the text of an expired law known as “Good Jobs for Michigan” to create a new one. law Project. The Good Jobs Act itself contained language that had been taken directly from another previous program, the failed Michigan Economic Growth Authority, which offered $ 14 billion in targeted tax relief over its lifetime. .

A great textual change in the $ 300 million bill, SB 615 (known as the Michigan Employment Opportunity Program), involves a mandate that a certain percentage of transactions must go to small communities. There is a lot of trouble with this proposal, as with previous grant laws, and relaxing the requirements for sparsely populated counties does not improve its chances of success. Additionally, there is ample evidence that programs like SB 615 are at first glance ineffective.

Under the proposal, workers would effectively be required to pay their own bosses. Some companies would receive a subsidy, based on personal income taxes owed by new hires. Previous versions of the program, Good Jobs and MEGA, were also based on state income tax.

Michigan has been here before. The MEGA distributed more than 700 refundable tax credit agreements from 1995 to 2011. It was amended in 2004 to make “rural” tax credits specifically compulsory for populations of less than 90,000 inhabitants. Despite this, nearly a third of Michigan counties (mostly rural) have never hosted a MEGA recipient. There is at least one good reason for this, and state mandates cannot overcome it.

Densely populated areas of the state are already home to the large companies most likely to receive state tax favors, and companies willing to locate in the state will likely locate where the talent pool is most likely to be found. most important and access to supply chains is strongest. This is probably why the three most populous counties – Oakland, Macomb, Wayne – plus Washtenaw, have hosted more than half of MEGA transactions. And all seven of the Good Jobs for Michigan deals went to high population counties.

POEM puts geography in the driver’s seat, and not necessarily just economic or fiscal matters. This bill would limit its agreements to 40 per year, divided by population groups. The smallest number, 10, would go to the most densely populated (and apparently popular) level, with 15 each going to the other two. Of the $ 300 million that would be authorized by the program, however, the largest cut ($ 125 million) would go to the most densely populated counties.

Similar attempts to conduct projects in rural areas of other states have been ineffective. North Carolina is divided into three tiers for economic development (and other) purposes, and the state has five programs in place that offer incentives for business development. Level 1 represents the 40 poorest (and generally rural) counties in the state, and level 3 contains the richest, which are more urban and populous.

Despite this, according to the North Carolina Justice Center, businesses are relocating massively to urban and more densely populated areas. The Justice Center study, “Money and jobs don’t match“, Notes that despite the official focus on rural and disadvantaged areas,” the counties which have not received any incentive projects are almost entirely confined to rural areas. … “

The study also reveals that the majority of incentive deals “and the jobs promised are concentrated in the most urban and prosperous areas of the state.” Three other urbanized counties in North Carolina accounted for 56% of the total incentive dollars awarded between 2007 and 2014.

If Michigan’s SB 615 supporters try to sell another incentive program based on what it might help low-population counties, they have a lot of work to do. Even when it comes to incentives, experience shows a clear preference for richer and more populous regions.

There’s also the fact that there’s a lot of evidence to show that programs like this don’t work. A similar design program in Kansas has been studied extensively by economist Nathan Jensen. He found that Kansas businesses subsidized by the program were no more likely to create jobs than non-subsidized equivalents. There is a lot of other evidence that these programs are ineffective, and I testified to this at a recent Senate committee hearing on this same bill.

There is simply no good reason to pass Senate Bill 615. Evidence shows that it is unlikely to help rural or urban areas of the state.

Permission to reprint this blog post in whole or in part is hereby granted, provided the author (or authors) and the Mackinac Center for Public Policy are properly cited.

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