Michigan’s latest tax incentive, $526M, harshly criticized

(The Center Square) – Democratic Gov. Gretchen Whitmer says 1,569 jobs will be created, and critics are howling at such a cost to taxpayers for expansions to plants already in Michigan.

Whitmer on Tuesday said a $526 million tax incentive – that’s more than $335,000 per job – is in place for automotive supplier Magna to be used in St. Clair, Highland Park and Shelby Carter Township. Magna plans to expand the St. Clair plant, which gets the lion’s share at $426.6 million in incentives with expectation to create 920 engineering, production and machinery maintenance worker jobs.

Taxpayer dollars will come from the state’s Strategic Fund, said Whitmer and the Michigan Economic Development Corp. The company, headquartered in Michigan, was founded in 1957, operates 32 facilities in the state, and employs more than 10,000 Michigan workers.

According to Macrotrends, the company earned $36 billion in revenues for the 12-month period ending June 2022.

“This is just the latest example of the utter failure of Michigan’s leaders to develop an economic development strategy that’s based on evidence and market conditions, rather than politics and payoffs,” John Mozena, president of the Center for Economic Accountability, wrote in an email to The Center Square. “If you go look at online hiring sites, there are more than 6,000 open ‘manufacturing’ jobs in Metro Detroit. When I see an announcement of ‘1,500 new jobs,’ what I see is ‘1,500 more open positions that make it harder for every other employer in the region to meet their hiring needs.’ If I were a local business owner or hiring manager, I’d be wondering why my state tax dollars were going to subsidize a competitor for high-demand talent and make it that much easier for a major multinational auto supplier to hire away the workers I need to keep my company running.”

James Hohman is the Mackinac Center for Public Policy’s director of Fiscal Policy. In a blog post last week, he noted Michigan lawmakers have “authorized $18.4 billion in business subsidies since 2001.” He emphasized money directed from taxpayers to businesses are direct payments rather than tax abatements.

Since becoming governor in 2019, Whitmer has authorized another $2 billion in subsidies, Hohman wrote, adding that amount equals the annual operating costs of Michigan’s Department of Corrections.

“Since I took office, we have announced over 30,000 good-paying auto jobs, advanced our leadership in mobility and electrification, and brought critical supply chains of chips and batteries from China to Michigan,” Whitmer said in a statement. “Today’s exciting announcement further cements our status as the home of the auto industry and will help ensure that the future of mobility and electrification is designed, developed, tested and built here in Michigan.”

Mozena believes history says something else.

“We’ve been subsidizing manufacturers like this in Michigan for decades, and yet we have 185,000 fewer manufacturing jobs in Michigan than we did three decades ago,” Mozena said. “You could fill both Spartan Stadium and Michigan Stadium with those lost manufacturing jobs. It’s long past time to try something else.”

According to the governor’s news release, Magna supplies seats and powertrains among other automotive accessories and is the only automotive supplier that builds complete vehicles.

In Shelby Carter Township, Magna plans to expand its powertrain business. Officials said 159 jobs will be created with a $96.1 million investment and a $1.3 million Michigan Business Development Program grant. Additionally, the Strategic Fund approved a $369,837 five-year, 50% Alternative State Essential Services exemption for the project.

St. Clair is expected to approve a property tax abatement for the project as well as support the construction of a new water tower.

Magna’s Highland Park expansion will be to assemble seat frames and insource trim and foam assembly. The $3.7 million total capital investment includes a $2.9 million Business Development Program grant with the anticipation of creating 490 jobs.