"Michigan is one of the very few states in the nation that doesn't have a tax capture tool allowing companies to capture hired employees' income tax."
(Source: MIRS.news, Published 01/24/2023) Wednesday evening, the Governor highlighted her vision to create a "HIRE Michigan Fund," a rebranding of Gov. Rick Snyder's Good Jobs for Michigan program from 2017 through 2019.
The two-year program permitted businesses – like the Ford Motor Company, the KLA semiconductor manufacturer, and Pfizer, the biotechnology corporation – to capture payroll taxes from new employees. According to the MEDC, the program featured companies committing to offer new jobs paying $31.51 hourly, on average.
By committing to deliver 345 new jobs, Pfizer was awarded up to $10.5 million, and Ford was awarded up to $26 million for committing to generate 3,000 new jobs.
Sens. Sam Singh (D-East Lansing) and Mary Cavanagh (D-Redford Twp.) introduced SB 579, SB 580 and SB 581 to re-assemble the program as the High-wage Incentive for Regional Employment in (HIRE) Michigan program. With the Governor wanting to see the legislation more geared toward small-and second-stage businesses in its second incarnation, the legislation would allow $100 million to be made available annually, for up to 10 years, in the form of awarded tax captures.
Other economic development tools touted by the Governor Wednesday included a research and development (R&D) tax credit, which the House has already approved in the form of allowing smaller-sized companies to write off 15 percent of their R&D expenses – up to $250,000 per employee – on their taxes, and permitting large companies to write off 10% of their R&D costs up to $2 million per employee.
Additionally, she called for more renaissance zones, providing a series of tax exemptions to developing business projects, and an "Innovation Fund" to directly invest in high-growth startups.
"These are performance-based," said Chief Executive Officer Quentin Messer Jr. of the Michigan Economic Development Corporation (MEDC). "There are going to be sensible, common sense caps on that. It's not going to be an unlimited getaway, and the (renaissance zone) modernization, I believe, is at no cost at all because essentially all we're doing is making it more flexible so we don't artificially cap ourselves. So I think what we will see is that this is going to be a fiscally prudent response, and more importantly, it allows us to pay in the competitive sector."
Mike Johnston, the vice president of government affairs for the Michigan Manufacturers Association (MMA), told MIRS that currently, Michigan is one of the very few states in the nation that doesn't have a tax capture tool allowing companies to capture hired employees' income tax. He described it as a great mechanism that isn't budgetary because "there are no dollars unless people deliver jobs."
He said while the Strategic Outreach and Attraction Reserve (SOAR) Fund – which deploys multi-million dollar incentives – serves larger business investments, he thinks HIRE Michigan will be intended to the hit middle ground of jobs.
"When you think about the knowledge economy, guess what? The auto industry and battery development and R&D are all critical manufacturing activities, and so we think there's value in making sure we're hitting that middle kind of tranche of economic growth," Johnston said.
Meanwhile, when it comes to everyday residents, Rep. Jaime Greene (R-Richmond) said "why don't you just give me an income tax reduction so I can keep it in the first place and I can decide where I want to invest my money."
"I'm thinking it's picking and choosing winners, and she's picking and choosing instead of giving the tax break to every person in Michigan across the board, and reducing their costs in their pocket," said Rep. Donni Steele (R-Lake Orion), a House Appropriations Committee member. "Let's not give it to the government so they can give it back to us in pieces. Let them keep it in their pocket and choose how they want to spend it instead of her dictating how it should be spent."
Sen. Mark Huizenga (R-Walker), chair of the Senate Appropriations subcommittee overseeing the MEDC, said last year was pretty indicative of big government giving big dollars to big corporations, "and that's probably not the greatest solution."
He said a work environment with low regulations, a long-run of lower taxes and workers with lower costs "is what people really want."
He said he would much rather see things like incubator spaces for new companies and "real research and development" than high incentives for factories that build homogenous products where things could become automated in the future.
